Boeing (BA) Just Got a Double Shot of Good News; Buy Ahead of Earnings - TheStreet

The news keeps getting better for aerospace giant Boeing (BA) - Get Report , ensuring that its order book remains brimming with lucrative contracts for decades.

Buy this blue chip ahead of what is expected to be a robust third-quarter earnings report.

First came this week's green light from the Obama administration for the company's $17.6 billion deal to sell various models of passenger airliners to Iran. The agreement is one of the most significant economic results of the international nuclear agreement with Iran that took effect in January.

Another windfall shortly followed, when it was reported Thursday that the White House has approved the long-delayed sale of Boeing combat jets to Kuwait and Qatar. Both deals should keep Boeing's production lines busy, regardless of the ups and downs of the broader economy or stock market.

This double shot of good news for Boeing positions the stock for market-beating growth.

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The military mega-deal calls for 36 Boeing F-15 fighter jets, valued at about $4 billion, to be sold to Qatar. Kuwait would purchase 28 F/A-18E/F Super Hornets with the option for 12 more for about $3 billion.

The deal had been delayed by U.S. officials' worries over Qatar's alleged ties to armed Islamist groups, as well as concerns raised by Israel. Boeing management allayed those concerns.

Richard Aboulafia, an aerospace analyst with the Teal Group and one of the most widely followed experts in the aerospace/defense sector, put it succinctly: "The F-15 could conceivably live to see a half-century."

Boeing has been refurbishing the F-15 and F/A-18 with new technology, especially in the cockpit.

The U.S. generates more foreign sales of weapons systems than any other nation. One of America's fastest-growing military export niches is aircraft.

Middle Eastern nations, in particular, are clamoring for American-made combat aircraft that feature highly advanced technology. This demand will more than compensate for anticipated NATO belt-tightening.

Several developing countries are eager to defend themselves against age-old antagonists and homegrown dissent. The oil-rich Gulf States will remain loyal customers for Boeing, especially for its F-15s and Super Hornets.

Both planes are among the most popular fighter jet exports in the world and serve as the "aerial workhorses" for air forces around the world.

While it reaps a bonanza in military sales, Boeing's commercial business is enjoying boom times from economic recovery and rising consumer confidence.

Demand remains strong for Boeing's game-changing Dreamliner 787, a composite-built passenger aircraft. Aircraft made from composites enjoy reduced weight, improved fuel burn, and better resistance against corrosion and damage.

Boeing's fuel-efficient aircraft should enjoy even greater demand in the months ahead, as oil prices rise in the wake of the Organization of the Petroleum Exporting Countries' deal in Algeria on Wednesday to curtail production.

The company is scheduled to report third-quarter earnings on Oct. 26. The average analyst consensus estimate is for earnings of $2.62 a share, compared with $2.52 a share a year earlier.

Boeing's trailing 12-month price-earnings ratio is 24.37, about in line with the trailing P/Es of peers Lockheed Martin (21.02) and Northrop Grumman (19.53).

Shares of Boeing are trading at more than $131 apiece. The average analyst one-year price target is $147.88, would represent a gain of nearly 12%.


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John Persinos is an editorial manager and investment analyst at Investing Daily.

He also serves as an aerospace analyst at the Teal Group consultancy.

At the time of publication, Persinos owned stock in BA.