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How Will Boeing (BA) Stock Be Affected By New Assembly Issues?

Stocks in this article: BA

NEW YORK (TheStreet) -- Boeing Co. (BA) has reportedly pushed some factory work on the 787 Dreamliner to the uncovered tarmac outside its assembly plant in Washington state in an effort to keep churning out the popular plane at a rate of one every three days, sources told Reuters.

At the same time, the sources added, at least 16 Italian-made fuselage sections for the 787 have stacked up in a Booeing hangar in Wichita, Kansas, rather than being shipped directly to the factory, a sign of changes in the production process.

The unusual shifts, details of which have not been previously reported, are partly a response to unfinished jobs building up as 787s move along the assembly line and partly an effort by Boeing to speed up the factories, Reuters said.

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The company is trying to streamline 787 production and cut costs while reaching its target of delivering a record 110 Dreamliners this year, up from 65 in 2013.

Investors are counting on smooth Dreamliner production to lift Boeing's stock, which has declined 12% this year on fears that production could falter as Boeing speeds up the factories and introduces new models, and that global demand for new airplanes will taper off after years of heady growth, Reuters added.

Shares of Boeing are up 0.66% to $120.63. 

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, impressive record of earnings per share growth, compelling growth in net income, solid stock price performance and notable return on equity. We feel these strengths outweigh the fact that the company shows low profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • BA's revenue growth has slightly outpaced the industry average of 0.8%. Since the same quarter one year prior, revenues slightly increased by 1.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • BOEING CO reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. 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 ($8.25 versus $5.97).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Aerospace & Defense industry. The net income increased by 51.9% when compared to the same quarter one year prior, rising from $1,088.00 million to $1,653.00 million.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
  • 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

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