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Boeing Raises $25 Billion of Bonds to Weather 2020

Burkett Huey Equity Analyst

Analyst Note

| Burkett Huey |

On April 30, Boeing announced that it raised $25 billion in bonds with maturities ranging from three years to 40 years and that it is no longer seeking additional public or private funding. We’re maintaining our $281 per share fair value estimate for the firm and view shares as substantially undervalued. Our view of the transaction is twofold: On one hand, any liquidity concerns that investors had ought to be satiated by this. We’re positive about this transaction as a whole because it takes a large amount of tail risk off the table. By our estimates, the additional debt would allow the firm to survive for about a year of cash flow as bad as this March’s cash flow, which we think is an overly bearish assumption because Boeing is more closely managing expenses now. We think the firm will return to being cash flow positive in the months after the 737 MAX is recertified, which we’re expecting will happen in late summer 2020. 

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Company Profile

Business Description

Boeing is the world's largest aerospace and defense firm. With headquarters in Chicago, the firm operates in four segments, commercial airplanes, defense, space & security, global services, and Boeing capital. Boeing's commercial airplanes segment produces about 60% of sales and two-thirds of operating profit, and it competes with Airbus in the production of aircraft ranging from 130 seats upwards. Boeing's defense, space & security segment competes with Lockheed, Northrop, and several other firms to create military aircraft and weaponry. The defense segment produces about 25% of sales and 13% of operating profit, respectively. Boeing's global services segment provides aftermarket servicing to commercial and military aircraft and produces about 15% of sales and 21% of operating profit.

100 North Riverside Plaza
Chicago, IL, 60606-1596
T +1 312 544-2000
Sector Industrials
Industry Aerospace & Defense
Most Recent Earnings Mar 31, 2020
Fiscal Year End Dec 31, 2020
Stock Type Cyclical
Employees 161,100