BA Continues to Be Grounded

For Rothbort's preview heading into the Boeing conference call, please click here.

Boeing (BA - commentary - Cramer's Take), for a lack of a better term, is grounded. The company is suffering from labor, supply and economic issues.

The more I listened to the conference call, the more the company sounded like a homebuilder a few years ago, announcing ever-increasing backlogs. Who knows if or when the backlogs will turn into deliveries?

Also, the company has a new concern to grapple with -- namely, increasing pension costs. Government intervention may be necessary to settle the prolonged strike.

Boeing was once a stalwart of American industry, and now it has morphed into a laughingstock. I have considered adding Boeing to this year's list of inductees to my worst managed companies in the U.S.

The company reported EPS of 96 cents on revenue of $15.293 billion. Management estimates that year-over-year EPS declined by 60 cents per share due to lower deliveries of aircraft. Lower deliveries were attributed to the machinist strike and continued galley supply issues. In addition an unfavorable tax adjustment reduced EPS by 8 cents.

Backlogs grew to a new record of $349 billion, up 7% year-to-date. Commercial backlogs increased 8% year-to-date, to $276 billion, 10% of which is with U.S. carriers. So far this year Boeing received only 2 cancelations and 80 deferrals, and last week AMR (AMR - commentary - Cramer's Take) announced an order for a fleet of 787s.

Integrated Defense received a multiyear U.S. Army Chinook contract, international space station extension and, on Sept. 10, the Department of Defense withdrew the tanker competition.

Aircraft financing is still available but on a more selective basis. With lower oil prices, airlines can better recapitalize their fleets. The company has $9.5 billion of backstop financing in place.

Pension assets were down by 20% year-to-date. Boeing estimates additional pension expenses of $100 million in 2009.

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At the time of publication, Rothbort had no positions in the stocks mentioned, although positions can change at any time.

Scott Rothbort has over 20 years of experience in the financial services industry. In 2002, Rothbort founded LakeView Asset Management, LLC, a registered investment advisor based in Millburn, N.J., which offers customized individually managed separate accounts, including proprietary long/short strategies to its high net worth clientele. He also is the founder and manager of the social networking educational Web site TheFinanceProfessor.com.

Immediately prior to that, Rothbort worked at Merrill Lynch for 10 years, where he was instrumental in building the global equity derivative business and managed the global equity swap business from its inception. Rothbort previously held international assignments in Tokyo, Hong Kong and London while working for Morgan Stanley and County NatWest Securities.

Rothbort holds an MBA in finance and international business from the Stern School of Business of New York University and a BS in economics and accounting from the Wharton School of Business of the University of Pennsylvania. He is a Term Professor of Finance and the Chief Market Strategist for the Stillman School of Business of Seton Hall University.

For more information about Scott Rothbort and LakeView Asset Management, LLC, visit the company's Web site at www.lakeviewasset.com. Scott appreciates your feedback; click here to send him an email.