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TheStreet Open House

Boeing Shares Fade After Trading Higher Before the Opening Bell

Stocks in this article: BA

NEW YORK (TheStreet) -- Boeing (BA) traded as high as $132.80 before the opening bell Wednesday after the company beat analysts earnings per share estimates by 40 cents earning $2.42. The company upped its full-year guidance, but missed on the revenue line due to an earnings charge related to a fixed-price contract with the U.S. Air Force.

Boeing shares are up 21% over the last 12 months with a 12 month trailing earnings per share ratio at 17.4 and a dividend yield at 2.3%. The stock is down about 5% year to date with the Dow Jones Industrial Average up 3.2%. When I covered the Dow 30 on July 7 the second "crunching the numbers" table showed a semiannual risky level at $132.27.

On July 9 I wrote, "Buy Boeing Shares Following Big Buy Order From Emirates Airlines". In this post I suggested that investors looking to book profiles should consider using a good 'til canceled limit order to sell strength to semiannual and monthly risky levels at $132.27 and $134.22, respectively. With a premarket high at $132.80 the first GTC order would have been triggered.

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Let's take a look at Boeing's daily chart:

Courtesy of MetaStock Xenith

The daily chart will not show the pre-market high at $132.80 and it shows the lower open at $127.79 below its 21-day, 50-day and 200-day simple moving averages at $127.91, $131.17 and $30.34, respectively.

The study below the daily bar chart is a 12x3x3 daily slow stochastic. This measure of momentum shows a reading that's rising at 52.80 on a scale of 00.00 to 100.00.

Let's take a look at Boeing's weekly chart:

Courtesy of MetaStock Xenith

The weekly chart for Boeing is negative with its five-week modified moving average at $129.16 with its 200-week simple moving average shown in green at $88.29. The 12x3x3 weekly slow stochastic is declining at 26.08.

Investors looking to buy Boeing shares should continue to consider using a good 'til cancelled limit order to buy weakness to its semiannual value level at $122.99.

Investors looking to sell Boeing shares should continue to consider using a good 'til cancelled limit order to sell strength to the semiannual risky level at $132.27.

At the time of publication the author held no positions in any of the stocks mentioned.

Follow @Suttmeier

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff

TheStreet Ratings team rates BOEING CO as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"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 3.1%. 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 43.40%.
  • 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 ($7.70 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.

Richard Suttmeier is the chief market strategist at ValuEngine.com. He has been a professional in the U.S. Capital Markets since 1972, transferring his engineering skills to the trading and investment world.

Suttmeier has an engineering degree from Georgia Tech and a Master of Science degree from Brooklyn Poly. He began his career in the financial services industry in 1972 trading U.S. Treasury securities in the primary dealer community. He became the first long bond trader for Bache in 1978, and formed the Government Bond Department at LF Rothschild in 1981, helping establish that firm as a primary dealer in 1986. This experience gives him the insights to be an expert on monetary policy, which he features in his newsletters, and market commentary.

Suttmeier's industry licenses include, Series 7 and Registered Principal (Series 24). He has been the Chief Market Strategist for ValuEngine.com since 2008 and often appears on financial TV.

Click here for details on Suttmeier's "Buy and Trade" investment strategy.

Richard Suttmeier can be reached at RSuttmeier@Gmail.com

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