Boeing Gains on $30 Billion GE/AerCap Deal; Cramer Says Run Has Begun

Jim Cramer says the $30 billion aircraft leasing deal between GE and AerCap could signal a 'roaring boom' in international travel and spark a run in Boeing shares.
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Boeing  (BA) - Get Report shares extended gains Wednesday, testing the highest levels in more than a year, following a $30 billion aircraft leasing deal between General Electric  (GE) - Get Report and AerCap that Jim Cramer says could spark further moves to the upside.

GE said Wednesday that AerCap will buy all of its GE Capital Aviation Services, the largest portion of its GE Capital division and also known as GECAS, for $24 billion in cash, 111.5 million in AerCap shares and a further $1 billion that could be paid in either cash or notes. 

The transaction would leave GE with a 46% ownership stake in the combined group, which will have around 2,600 commercial aircraft in service, store or on order from major carriers around the world.

Boeing said Tuesday that its net order book turned positive for the first time in more than a year last month, with 86 gross orders paced by 39 new requests for the 737 MAX. That puts Boeing's total backlog at 4041 aircraft as of the end of February.

Boeing's  February tally was well ahead of the 11 new order total reported by its European rival, Airbus  (EADSY) - Get Report, which was lead by a booking of 10 new A320 airplanes from an unidentified customer. It also suggests to the Street's founder, Jim Cramer, that the run in Boeing shares "has begun" even if "analysts have yet to recognize it."

"Boeing outselling Airbus is the beginning of the long-awaited comeback. I think that AerCap, a savvy operator, wants to be bigger because it senses the roaring boom coming in travel," Cramer said. 

Boeing shares were marked 5.2% higher in early afternoon trading Wednesday and changing hands at $242.60 each, boosting their six-month gain past 50% and to within touching distance of the one-year high of $244.08 the shares reached on December 7. 

United Airlines  (UAL) - Get Report said last month it buy 25 new 737 MAX jets, which were cleared to return to service by the Federal Aviation Administration late last year, and moved up the delivery of 40 of the previously-ordered planes to 2022.

Boeing delivered 18 737 MAX jets in February, the company said, the bulk of its total of 22 commercial planes for the month. 

Canaccord Genuity analyst Ken Herbert said earlier this week that an improved outlook for airplanes orders of the second half of the year will be a 'positive catalyst' for Boeing shares as he lifted his rating on the stock to a 'buy" with a $275.00 price target.

He also noted that rising market interest rates will be less of a headwind for Boeing, as they'll be seen as more of a signal for a commercial airlines turnaround than a component of increasing production costs.

"While BA’s widebody franchise will take substantially longer to recover, we see stability in the 787 and 777 build rates into 2022-2023," Herbert said. "However, we believe an uptick in air travel and continued stimulus will enable BA to see an increase in orders after several quarters or very low activity."

"There is risk to the ~300 777X backlog, but we believe this is well understood by investors," he noted.  

Boeing delayed the launch of its 777X widebody in late January after posting a wider-than-expected loss of $15.25 per share for the three months ending in December.

Group revenues, the company said. fell 14.5% to $15.3 billion, but topped analysts' estimates of a $15.07 billion tally. Free cash flow, however, was measured at -4.274 billion.