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Boeing, Embraer May Have No Reason to Fear China’s Weak Rival AVIC

Stocks in this article: BA


A separate AVIC affiliate builds the MA60 turboprop, which has been sold domestically and abroad, most recently to a carrier in Nepal. The plane has had safety problems, though, including two non-injury mishaps earlier this year in China involving landing gear problems during fully loaded passenger flights.

The securities firm report said the MA60's overseas markets in Asia, Africa and South America have recently withered due to a "crisis of confidence" over safety. Meanwhile, the company is working on a replacement turboprop called the MA700, which could be ready for test flights by 2019.

The securities report also said AVIC's "military aircraft delivery schedule was behind schedule" in the first half.

The best news for AVIC so far this year is that its plants are making money and meeting production targets for passenger jet parts manufactured under contracts with Boeing, Airbus and Bombardier.

Read More: 10 Stocks Carl Icahn Loves in 2014

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 solid stock price performance, impressive record of earnings per share growth, compelling growth in net income, revenue growth 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:

  • 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, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
  • 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 ($8.20 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.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 1.3%. 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.
  • 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.

At the time of publication, the author held no positions in any of the stocks mentioned. This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
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