New York ( TheStreet) -- The 1,500 th Boeing (BA - Get Report) 747 will receive a grand welcome Tuesday, when Lufthansa puts the latest model, the 747-Intercontinental, to work on the Frankfurt-JFK route. No other widebody aircraft has yet recorded 1,500 sales.
Unfortunately, few welcomes remain for the 747, a dramatic innovation when it was first flown by Pan American World Airways in 1970 as the first twin-aisle jet and easily recognizable due to its size and the hump at the top of its frame.
In its time, the 747 was both a "game changer," the term now widely applied to the Boeing 787, and also "a moonshot," the term Boeing CEO Jim McNerney used in May to describe an innovative course that Boeing no longer wants to pursue.
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Boeing shares closed Friday at $128.09, up 1%.
The 747 is being replaced by newer, more efficient, more specialized aircraft. "The passenger model fills a niche within a niche, squeezed on top by the Airbus A-380 and on the bottom by the 777," said aviation consultant Scott Hamilton, president of Leeham Co. "The airlines I talk to think the cost is too high for what you get."
Meanwhile, the 747-8F, a freighter aircraft that began flying commercially in 2010, faces a difficult cargo environment. "The cargo market is poor," Hamilton said. "It's been coming back a little this year, but you've got a lot of surplus capacity, a lot of freight moving in the 777 and the A330, and the 747 competes with the 777F." The 777 cargo variant was launched in 2005.
"Boeing doesn't talk much about the passenger model anymore, but it claims there will be an indefinite requirement to produce one to 1.5 freighters a month," Hamilton said. "They think they will see a cargo recovery in 2016 or 2017." But Hamilton anticipates the aircraft will be gone by the end of the decade.
Lufthansa took delivery of the first 747-Intercontinental in 2012, and now has 14 of them. Boeing has received 120 orders for the latest and likely the last 747 variant, which Lufthansa will fly with 362 seats. "The 747-8I passenger version has four years or less, although the last few will be notable as the latest Air Force One variants," said aerospace analyst Richard Aboulafia of the Teal Group.
"The 747 was indeed a moonshot," Aboulafia said. "But the world was different back then. This is a far more mature industry, with fewer compelling opportunities for new product launches."
In a recent story -- "The 747 Is Going Extinct" -- the online news site Quartz reported that the 747's capacity share, as measured by available seat miles, is expected to fall 14.1% between 2009 and April 2015. Over the same period, the Airbus A330 share is expected to grow 8.8% and the Boeing 777 share is expected to grow 8.7%, said Quartz, using data compiled by PlaneStats.com.
"In January of 2009, there were 382 billion available seat miles on 747s," Quartz reported. "In April 2015, there are 169 billion scheduled. In that time one quarter of 747 operators will have stopped flying the equipment."
Lufthansa still has 19 747-8s on order, as well as 14 in service. "Although we've flown the new 'Queen of the Skies' to our JFK gateway on occasion, this marks the first time Lufthansa has dedicated 747-8 service to the New York market," said Juergen Siebenrock, Lufthansa vice president for the Americas, in a prepared statement.
During the summer, the aircraft will serve six destinations in the Americas: Chicago, Los Angeles, Mexico City, Sao Paulo and Washington, D.C., as well as New York.
"We rate BOEING CO (BA) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures, solid stock price performance and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- BA's revenue growth has slightly outpaced the industry average of 3.2%. Since the same quarter one year prior, revenues slightly increased by 8.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Net operating cash flow has significantly increased by 112.21% to $1,112.00 million when compared to the same quarter last year. In addition, BOEING CO has also vastly surpassed the industry average cash flow growth rate of 44.19%.
- BOEING CO's earnings per share declined by 11.1% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, BOEING CO increased its bottom line by earning $5.97 versus $5.12 in the prior year. This year, the market expects an improvement in earnings ($7.68 versus $5.97).
- The debt-to-equity ratio is somewhat low, currently at 0.62, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.38 is very weak and demonstrates a lack of ability to pay short-term obligations.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. When compared to other companies in the Aerospace & Defense industry and the overall market, BOEING CO's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
- You can view the full analysis from the report here: BA Ratings Report