The Bullish and Bearish Case for Boeing in 2014

Boeing closed out 2013 at $136.49, and shares were up an astonishing 84%. Its gain was less than 2% in December, but Boeing was up almost 16% in the final quarter of 2013.

There are many macroeconomic and company specific factors to consider for Boeing in 2014. Its 787 Dreamliner has overcome most of the woes associated with the plane, and it keeps churning out new orders for its existing plane models. It turns out that Boeing may have the largest backlog of any single U.S. company if all those planes ordered in the next decade are delivered.

Most Wall Street strategists are forecasting higher price targets for the stock market. Investors have to hope this will lift Boeing as well. The Federal Reserve’s gradual end to quantitative easing is expected to create only a gradual rise in interest rates, which should also support growth. Airline mergers are of course a risk, because it means fewer clients, but the airline sector is turning into one that can dictate prices and terms to flyers, and that gives Boeing healthier customers than it has seen in many years.

The world markets are exiting their recessionary trends as well. Europe and Asia are starting to improve, and U.S. growth is expected to rise to about 3%. The ongoing increase in global trading offers yet one more avenue for plane sales growth ahead. All of this should bolster Boeing.

The outlook for Boeing is still positive. It raised its dividend to where it is paying 2.1% now, and it is buying back stock too. After closing out the year at $136.49, its consensus analyst price target at year-end was $150.13. Now Boeing is trading above $140, and the consensus price target is above $151.00. Boeing trades at about 18 times expected 2014 earnings.

The bearish case for Boeing at this time is one that no one wants to discuss. It could come from a disaster in the skies, or it could be in a whole new series of problems arising in the 787 Dreamliner all over again. That being said, these are scenarios we hope do not occur. Defense spending cuts and defense project setbacks are an ongoing risk as well.

We would point out that the highest Boeing price target is from Sterne Agee and is all the way up at $175 for the stock, although this is not necessarily just at year-end of 2014. We pointed out that Boeing could become the most important stock in the DJIA, and that was at much lower share prices.