Fool colleague Tim Beyers, who kicked himself for missing out on Boeing's (NYSE:BA) 2005 run, may want to reconsider the boot. And maybe he should spare one for me, too.
It's tough not to be impressed with Boeing's latest results, despite the seemingly anemic top-line growth of 7% for the quarter and 5% for the year. On the bottom line, the firm showed a 152% increase in Q4 earnings per share and a 39% increase for the full year. Yes, there were the usual one-timers in there to figure (core earnings rose 35%, adjusted), as well as share buybacks, but the cash flow is less susceptible to the judgment calls, and perhaps that's why Boeing brought it to the forefront.
Operating cash flow after hefty pension contributions was still up 80% for the fourth quarter and 100% for the year. Back out $1.5 billion in capital expenditures and you're looking at $5.5 billion for the year ended December 2005 -- that's more than double the previous year's tally.
While the headlines are all about the big plane war with Airbus, the underlying carrier market has helped catapult Boeing's commercial airplane backlog to $124 billion. Operating margins in the division improved a full 2.7 percentage points for the year, up to 6.3%. Integrated defense systems -- which has to compete with the likes of Lockheed Martin (NYSE:LMT) and Northrop Grumman (NYSE:NOC) -- outran that pace of improvement, with operating margins at 12.6% for the year, up three percentage points.
Although I'm a fan of 3M (NYSE:MMM) and think the former Brunswick (NYSE:BC) CEO who has taken over there will do good things, listening to the Boeing conference call makes me wish Jim McNerney were back in Minnesota. It's clear that he's driving Boeing to become even more profitable, both through restructuring as well as management incentives that put a premium on longer-term value. That should help remake a corporate culture that's got more than its share of scandal to leave behind.
There's no doubt that Boeing shares have had a nice run, but I'm not so sure there isn't a bit more altitude to be gained. Boeing itself is betting big that this will happen. The firm has repurchased millions of shares and is authorized to continue. But the degree of Boeing's confidence in its value and its cash flow is evident from the remark that chief financial officer James Bell delivered during the conference call, a defiant half-promise to buy even more, ". if you all continue to undervalue the stock."
I'm not sure I'd want to take the other side of that trade.
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Seth Jayson might wish he had shares of Boeing, but at the time of publication, he owned 3M common shares, but had no position in any other firm mentioned. View his stock holdings and Fool profile here. 3M is a Motley Fool Inside Value recommendation. Fool rules are here.
