If recent history is any indicator, odds are that the United States will continue to fight on or above foreign battlefields in the decades to come. It's also likely that as our economy grows the demand for corporate and leisure travel will expand by a good amount. These are just two of the reasons why I think that shares of Boeing (NYSE:BA) have serious upside potential.
IN PICTURES: 20 Tools For Building Up Your Portfolio
Why Lift Off Is in the Cards
Over the last year or so, Boeing's reputation seems to have taken a bit of a hit because of the delays associated with its Dreamliner aircraft. But I think it makes sense to look past that and onto the things that the company has in its favor. Not only does the company supply popular and necessary aircraft for the U.S. military, such as the F-15 and F/A-18, but it also is a mainstay in the commercial market with its 737, 747 and 777 aircraft.
Digging deeper, it's important to note that the company is performing financially and coming off a better than expected second quarter. It's also interesting that the shares are trading in the upper-end of their 52-week trading range. Things like this have the potential to draw a great deal of institutional investor attention and the eyes of other investors.
Estimates
Boeing is expected to release its third quarter numbers on October 21. Wall Street is currently expecting the company to post a loss of $1.04, but I think that it could do a bit better than that. I will be more focused on what management says, as I hope that in conjunction with the numbers it will paint a rosy picture for upcoming quarters. I'm also hoping management will have positive things to say about the 787 program and work that's being done. Note that the company has come out and said that "first delivery is expected to occur in the fourth quarter of 2010." I think that investors will be anxious for any additional color.
Boeing presently trades at more than 21 times the 2009 estimate, which is $2.45. Normally, that would cause me to hesitate in a big way. However, it's not that bad given that it is also expected to earn a heftier $4.43 in 2010. Actually my sense is that the current year estimate could end up being on the conservative side.
Other Ways To Play
In the defense arena I think that Lockheed Martin (NYSE:LMT), which trades at 10 times this year's estimate is worth a closer glance. I also like Northrop Grumman (NYSE:NOC), which is at 11 times the 2009 estimate.
From a travel perspective, I just don't like the airlines because of the government regulation and fuel costs (among other things) associated with the space. I'd rather discuss and play the cruise lines instead. To that end both publicly traded Carnival (NYSE:CCL) and Royal Caribbean (NYSE:RCL) intrigue me long-term.
Bottom Line
Boeing is likely to be a major player in the defense arena and commercial aircraft production business for many years to come. Because of this, and its potential to grow its bottom line in the year to come, I think the shares are worth a closer inspection. (For another take, check out Analyst Forecasts Spell Disaster For Some Stocks.)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
