boeing finance 3

7/28/2019 Boeing Finance 3

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Boeing (BA)Castell BarnesAlbert Sutton

Alessandra Fiumi


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Established in Chicago, Illinois in the early 20th Century

Boeing is the world's largest aerospace company and leadingmanufacturer of commercial Jetliners, defense, space andsecurity systems

A top U.S. exporter, the company supports airlines and U.S. and

allied government customers in more than 90 countries

Pioneer in engineering, technology and operational innovations(NASA)

The Boeing Company???


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Boeing products and tailored services include commercial

and military: Aircrafts

Satellites

Weapons

Electronic and defense systems

Launch systems

Advanced information and communication systems

Performance-based logistics and training

Products & Services


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To sustain environmental awareness, Boeing Company

takes steps in manufacturing recyclable parts and fueldissolvable engines

Boeing is organized into two business units: 1. BoeingCommercial Airplanes and Boeing Defense, Space &

Security

The prime supporting unit is the Boeing CapitalCorporation

Products & Services (contd)


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Boeing Capital Corporation is a global provider of

financing solutions

It arranges and structures financials to facilitate thesale and delivery of Boeing commercial and military

aircraft, satellites and launch vehicles

Boeings 2009 portfolio totaled to an approximate$5.7 billion

Boeing Capital Corporation


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Liquidity Ratios


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Current Ratio =

Current Assets/Current Liabilities

Current

Ratio(In Times)

2010 2009 2008

BA 1.15 1.07 0.84

LMT 1.15 1.16 1.01


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Acid Test/Quick Ratio = CurrentAssets Inventory/Current

Liabilities

Acid Test/

Quick Ratio(In Times)

2010 2009 2008

BA 0.46 0.56 0.33

LMT 0.93 0.96 0.83


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Average Collection Period = AccountsReceivable/Daily Credit Sales (Annual Credit

Sales/365 days)

Average

CollectionPeriod(In Days)

2010 2009 2008

BA 32.6 38.1 39.9

LMT 54 57 52


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Accounts Receivable Turnover = Annual Credit

Sales/Account Receivable

Accounts

ReceivableTurnover(In Times)

2010 2009 2008

BA 11.20 9.6 9.2

LMT 6.74 6.39 7.06


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Inventory Turnover = Cost of GoodsSold/Inventories

Inventory

Turnover(In Times)

2010 2009 2008

BA 0.5 0.7 3.2

LMT 17.64 18.2 20


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Capital Structure

Ratios


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Debt Ratio = Total Liabilities/Total Assets

Debt

Ratio

2010 2009 2008

BA 96% 97% 98%

LMT 89% 88% 91%


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Times Interest Earned = Operating Income(EBIT)/Interest Expense

Times

InterestEarned(In Times)

2010 2009 2008

BA 28.17 9.87 21

LMT 12.08 14.7 14.7


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Asset Management

Efficiency Ratios


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Total Asset Turnover Ratio (TATO) =Sales/Total Assets

Total Asset

Turnover Ratio(In Times)

2010 2009 2008

BA 0.94 1.10 1.13

LMT 1.3 1.25 1.27


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Fixed Asset Turnover Ratio = Sales/Net Plantand Equipment (PPE)

Fixed

AssetTurnover(In Times)

2010 2009 2008

BA 7.20 7.77 6.95

LMT 10.05 9.73 9.52


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ProfitabilityRatios


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Operation Return on Assets Ratio(OPMxTATO)

Operation

Return on Assets(In %)

2010 2009 2008

BA 6% 3% 6%

LMT 11% 12% 15%


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Return on Equity (ROE) = NetIncome/Common Equity

Return

OnEquity(in %)

2010 2009 2008

BA 11% 5% 9%

LMT 23% 23.7% 26%


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Market Value

Ratios


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Price-Earnings Ratio = Market Price PerShare/Earnings Per Share

Price-

EarningsRatio(In %)

2010 2009 2008

BA 56% 23% 23%

LMT 12% 15% 34%


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Market to Book Ratio = Market Price perShare/Book Value per Share

Boeing

Market

To BookRatio

2010 2009 2008

BA 16.78 20.1 17.0

LMT 5.67 3.45 8.9


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Stock Analysis


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5 Year Chart


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Stock Price Change (5 Years)

Boeing (BA) Lockheed MartinCorp. (LMT)

-9.17 6.66


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Boeing Vs. Lockheed Martin Corporation Vs. Dow Jones


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Stock Analysis

Average Monthly Return= 1.82%

Standard Deviation= 6.686785476

Annual Return from Monthly Data= 21.17%


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BETA (Yahoo Finance)= 1.29

10 Year US Treasury Bond= 3.18%

Risk Free Rate= 5%

Required Rate of Return= 9.63%

CAPM


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Financial Crisis


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Hard time for commercial customers to get financing in order tobuy new airplanes

The financial-system rescue plan will have an impact on thefuture defense budget

Downturn of world economies leads to reduce air travel worldwide

Anticipate and respond to the crisis

Let's keep our costumers at the top of our minds as we work ourway through the crisis.

Boeing CEO and Chairman, Jim McNerney

FOUR IMPLICATIONS


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The strike involved 27,000 workers Outsourcing Job security Pay Benefits

Workers believe that five years run of $13 million could give themwhat they wanted.

3,700 backlog means a long period without working The strike lasted 4 weeks with a cost of $100 million for the

company.

Boeing machinists strike of 2008


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Demand had fallen

Raw material demand decline

High oil price

Cut operating cost down by cutting back flights

Effects of the Financial Crisis


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Benefits Wide body

Twin-engine jet airliner Fuel efficient (20% less fuel then

similar Boeing 767) Composite material 210-330 passengers

Three years delay: Strike Outsourced of manufacturing and

design Lack of experience with

composite material

The 787 Dreamliner


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The decline in the air travel was not considered thatdramatic ( September, 11,2001)

Commercial aerospace market is still considered verystrong

The fall in sales was cushioned by the record backlog oforders (7,320 aircraft)

Pace of orders slowed down but it remains fairly strong(633 net orders in 2008)

Recovery from the Global EconomicCrisis


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The strike is just a bump in the road, will not cause any long term

problems

2010: Boeing sold three time as many commercial airplanes as theyear before

Oil price is more manageable

Boing is boosting production to accommodate orders

Growth trend for order will continue as emerging economiesexpand

Recovery


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Buy? Sell? Hold?


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1. Risk vs. reward. Average annual return of 13.4% compared to10% of S&P 500 which means the risk is very high

2. Boeing stock is attractive: current stock price is less than whatthe company expect to generate in cash over its lifetime

3. Analysts expect the company can increase earnings 12.8% a

year for the next five years so that the stock will be in thebuy range

4. The aerospace market is still strong, new orders for Boeing areencouraging, built rate are set to go high.

Should We Buy BA?


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Boeing looks good at the current price but an attractivelypriced stock can remain the same way for very long.

After so many delays and promises over the 787Dreamliner investors lost trust in the company.

Hang on: If you can handle that Boeing is riskier than itshould be given its return

Sell it: If you can get a better return for the amount of riskyou are taking

Buy/Sell/Hold

boeing finance 3

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