CHICAGO (

TheStreet

) -- TheStreet.com's stock-rating model upgraded aerospace and defense contractor

Boeing

(BA) - Get Report

to "buy."

The numbers

: Boeing's second-quarter net income increased 17% to $998 million and earnings per share climbed 22% to $1.41. Revenue grew 1% to $17 billion. The company's gross margin rose from 20% to 22%, and its operating margin expanded from 7% to 9%. Boeing has a weak financial position, with $4.8 billion of cash and $9.1 billion of debt. A quick ratio of 0.4 demonstrates less-than-ideal liquidity. We give Boeing a financial strength score of 2 out of 10, less than the "buy"-list average of 7.

The stock

: Boeing has advanced 22% this year, more than the

Dow Jones Industrial Average

and

S&P 500 Index

. The stock trades at a price-to-earnings ratio of 17, a discount to the market, but a premium to aerospace and defense peers. The shares pay a 3.2% dividend yield, higher than the S&P 500 average of 2.8%.

Industry comparison

: Despite its premium price, Boeing remains an attractive aerospace and defense play. Based on trailing earnings, its shares are more expensive than those of large-cap competitors, such as

United Technologies

,

General Dynamics

(GD) - Get Report

and

Raytheon

(RTN) - Get Report

. However, Boeing offers a bigger dividend yield than these companies. And a payout ratio of 41% means the dividend is not only safe, but has room to grow.

Risks

: TheStreet.com Ratings makes investment recommendations assuming a long-term holding period. Boeing is subject to unique industry pressures since it derives a substantial portion of its revenue from the U.S. government. Political uncertainty, troubles in the airline industry, delays on the 787 Dreamliner project and a credit downgrade by

Moody's

(MCO) - Get Report

are areas of concern.

Outlook

: Competitors

Lockheed Martin

(LMT) - Get Report

and

Northrop Grumman

(NOC) - Get Report

report third-quarter results next week. Boeing will report its third-quarter performance before the market opens on Oct. 21, which should show how the company is faring under the strain of economic weakness and cost-cutting at the Department of Defense.

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