The first thing that we notice about three of these top-performing companies is that they offer a virtually unique product promise. Apple’s iPhone and now the Apple Watch are category leaders; Disney’s superhero lineup plus its upcoming “Star Wars” movie are hugely popular; and Boeing has just one competitor for its products.
Of these three only Boeing does not totally dominate the markets they compete in. Compared with archrival Airbus Group NV, Boeing annually delivers more commercial jets even though it typically trails Airbus in new orders. And that’s why Boeing remains a cash machine
Boeing reported that it had delivered a record-hgh 723 commercial jets in 2014 and expects to deliver between 750 and 755 in 2015. That’s over 100 more than Airbus expects to deliver.
Those deliveries feed the company’s cash flow. Full-year operating cash flow before pension contributions in 2014 totaled $9.64 billion, down slightly from $9.72 billion in 2013, but free cash flow rose from $6.08 billion in 2013 to $6.62 billion in 2014. The company projects operating cash flow for 2015 at more than $9 billion.
Even negative cash flow for the first quarter of 2015 did not tank the stock although the poor showing did cause a dip of several points. The $486 million cash outflow the company reported for the first quarter was a big disappointment. Apparently the company pulled some of its advance cash payments forward into the 2014 fourth quarter.But even following that disappointing report on first quarter 2015 results, Boeing did not back off its $9 million cash flow projection for the year.
One analyst firm saw the pullback as a buying opportunity given Boeing’s still enormous backlog and projected deliveries for 2015. And if projections for the 787 prove accurate, the company could begin breaking even on those planes in the second half of this year and start showing a profit on each plane it sells beginning in 2016.
The biennial Paris Air Show begins June 15th and investors can expect Airbus to dominate new orders. The show is, after all, being held on Airbus’s home field. At the 2013 Paris Air Show, Airbus wrote orders for 466 planes valued at $68.7 billion and Boeing took 442 orders valued at $66 billion. While it may be optimistic to expect similar order levels again this year, anything’s possible
There are a couple of things worth watching for from Boeing: will another carrier join Ryanair Holdings plc (NASDAQ: RYAAY) and take the 737-200; and will there be any new orders for the current version of the 777? If either of these happens it would mark a nice positive for Boeing.
But Boeing’s main attraction to investors remains its cash flow which stockholders expect the company to share in the form of buybacks and dividend increases. Adding more planes to the company’s backlog is fine, but that doesn’t replace cold, hard cash.
ALSO READ: What Does a Boeing 787-10 Cost?
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