This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

Boeing: We Are Ready for Whatever Happens

CHICAGO ( TheStreet) -- Boeing (BA - Get Report) is prepared for the worst.

The worst would be the extremely unlikely event that "sequestration" actually occurs, cutting $500 million in defense spending over 10 years, on top of the longer-term downward trend in defense spending as the wars in Afghanistan and Iraq wind down.

"As we look forward to where the U.S. budget is headed, at a minimum expected a $500 billion reduction over 10 years, and a maximum of a trillion over 10 years," said Dennis Muilenburg, CEO of Boeing Defense, Space & Security, at a recent Bank of America/Merrill Lynch investor seminar. The latter would include the impact of sequestration.

"We are assuming that worst-case scenario, designing our cost structure to accommodate a $1 trillion cut," Muilenburg said. "We are preparing ourselves and have been preparing ourselves for that worst-case budget scenario."

A congressional "super committee" on Monday may announce it has failed to reach an agreement on deficit spending that would trigger automatic across-the-board spending cuts to a wide variety of domestic programs and the Pentagon budget, starting in January 2013.

If the worst-case scenario does not occur, Muilenburg said, that creates opportunities. But Boeing, he added, knows what other successful companies know, that "in a defense down cycle budget cycle, it's very important to not hunker down," but rather to invest.

Boeing's other strategies, which it has frequently discussed during the past year, include an effort to expand international defense and security sales in order to offset the decline in U.S. sales. Boeing spokesman Dan Beck said 83% of BDS revenue, which totaled $32 billion in 2010, is from government contracts, with the vast majority from the defense department. About 17% of BDS revenue is from international sales: The unit's goal is that international sales will generate 25% to 30% of revenue by 2013.

Additionally, Boeing has sought to expand into other related businesses including security, intelligence and energy management at military bases. And of course, Boeing is shielded from declines in defense spending by its vibrant commercial aviation sector, which accounts for about half of revenue.

BB&T Capital Markets analyst Carter Leake said that while defense contractors face obvious challenges from the current defense environment, Boeing appears to be better positioned than many of its peers.

"We are not naïve to the fact that all of the global defense suppliers can't all be right when they say increased international sales will be their savior, but if we look at the big, upcoming international fighter opportunities, Boeing's platforms are clearly the next best choice," Leake said.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
BA $150.08 -1.72%
LMT $202.96 -0.94%
AAPL $124.94 -1.10%
FB $82.63 -0.68%
GOOG $548.00 -0.73%

Markets

DOW 17,776.12 -200.19 -1.11%
S&P 500 2,067.89 -18.35 -0.88%
NASDAQ 4,900.8850 -46.5560 -0.94%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs