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Stock Strategist

Backlog Bolsters Boeing

With $490 billion in orders, the company's outlook is well grounded.

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Risk-taking has been a hallmark of  Boeing (BA), and the revolutionary 787 returned the company to that historical culture. Although the plane's cost overruns, supply chain issues, and grounding by the Federal Aviation Administration caused anxiety among investors, we think the product will be a long-term winner. Moreover, the 737 re-engine allows the company to strengthen its balance sheet and regain market share as it ponders the development of other aircraft variants. The company operates in a commercial aircraft duopoly with Airbus (AIR)--a market that Boeing estimates at $5.2 trillion (36,770 aircraft with 15,500 replacements) during the next 20 years--even as rivals in Canada and China seek to take a slice of this pie.

The narrow-moat company reported strong third-quarter results as deliveries of 186 aircraft, versus 170 last year, helped drive 15% sales growth in the commercial airplane segment to $16.1 billion. With defense sales down 2%, the total company delivered 7% revenue growth to $23.8 billion. The surprise continues to be the strong operating margins, which expanded 80 basis points to 8.9% even as 787 deliveries continued to grow. Earnings per share were higher by 23% to $1.86. Core EPS, which excludes certain pension costs, increased 19% to $2.14.

Neal Dihora does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.