The Bullish and Bearish Case for Boeing in 2015

When we ran the 2014 analyst outlooks for each DJIA component, Boeing analysts were calling for upside of almost 10% — and that was on the heels of Boeing having been the top DJIA stock of 2013. In 2014 shares traded in a range of $116.32 to $144.57, and the stock’s consensus analyst price target of $149.33 would imply upside of 15% this year.

Then there is the dividend yield of 2.8% to consider, which came after a 25% hike in December. This new dividend puts Boeing in the top half of all DJIA dividend yields.

One key consideration for the year ahead is that Boeing still has a more positive analyst bias, when compared to most other DJIA stocks. In fact, some analysts are calling for Boeing shares to fly up to $165 or even $175. That implies the biggest upside scenarios at 30% or more, if you include the new dividend.

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While much attention is on the ongoing order saga of the 787 Dreamliner, which is running ahead of the delivery schedule on last look, there are still the waves of 777 and 737 orders that come with higher margins for now. Also, the space and defense sectors both remain wild cards for large orders this year and in the years ahead. Those satellites, space taxi systems, aircraft and advanced systems can tally up to new orders well into the billions of dollars.

What still seems to come first is that Boeing needs to make sure that its production is in line with its sales. That seems simple enough, but forecasting actual orders versus actual deliveries has become almost a bit of wizardry in a world where orders can be walked away from without much protest.

Boeing recently announced that it delivered 723 commercial jets in 2014, at the high end of its prior range of 715 to 725 deliveries. Boeing also said that it delivered 114 of its 787 Dreamliners and 485 of its 737 single-aisle passenger jets. The annual total is Boeing’s best ever. For all of 2014, Boeing took net new orders for 1,432 commercial planes, with a carrying value of a whopping $232.7 billion at list prices. The company’s backlog now stands at a record 5,789.

With a dividend-adjusted performance of -2.6% in 2014, Boeing’s total expected upside, with the dividend included, will be 17.7%. Does upside of almost 18% seem too high? The projected upside of almost 10% for 2014 turned out to be too much, but that was after a gain of over 80% in 2013.

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Boeing has a market cap of $93 billion, and it trades at a discount to the broader market as its price-to-earnings (P/E) ratio is 15 for projected 2015 earnings. Boeing’s sales growth is projected to be almost 4% in both 2014 and in 2015, and expected earnings per share growth is 18% in 2014 and only about 3% in 2015.

Stay tuned.