At around $121, shares of the Dow Jones Industrial Average member are down nearly 12% for the year to date. Since hitting a 52-week high on Jan. 22 of $144.57 shares nosedived more than 18%, hitting a 10-month low of $117.87 on August 6.
Yes, the company hasn't had an easy time with its production system for building its 787 Dreamliner but Boeing is still on track to build 110 of them by year's end. That's 70% more 787s than were built in 2013, with the number slated to increase.
Investors forget that Boeing is working on fulfilling orders for over 1,000 Dreamliners booked over the past decade. The faster the company can deliver these fuel-efficient state-of-the-art jets, the quicker it will recover the nearly $33 billion spent so far to manufacture them.
As of the end of July Boeing had 273 net orders for wide body jetliners versus a minus 27 for Airbus due to cancellations, according to Reuters.
When it comes to its business model Boeing still has its lucrative defense division fulfilling orders from governments worldwide. With situations heating up in Ukraine and the Middle East I expect defense contract work to be robust over the next 12 months.
Boeing has 837 back orders for all types of planes so far in 2014 with a record 324 orders in July alone. This helps explain its remarkable year-over-year quarterly earnings growth of 59%.
The company's trailing 12-month return-on-equity (red line) is a stellar 42%. Like passengers awakening from an on board nap, investors are beginning to wake up to Boeing as a strong total return investment theme.
Along with the average analysts' target price, I see a reasonable 12-month price target of close to $155 for Boeing's stock. That's 28% above the recent share price of $121.
Add in the annual dividend of $2.92 with a yield-to-price of over 2.4% and the total return potential soars to over 30%. This takes into account potential headwinds like delays in the delivery of parts as recently reported in the case of Spirit AeroSystems Holdings(SPR) - Get Report .
When compared to other companies in the Aerospace & Defense sector and the overall market, Boeing's return on equity exceeds that of the industry average plus it significantly exceeds that of the S&P 500.
Take advantage of this seasonal lull in the shares of BA. The stock appears to have bottomed plus you’ll be paid a dividend nearly as generous as a 10-year treasury bond while waiting for the stock to be cleared for yet another steep ascent towards a realistic, exceptional target price.
At the time of publication, the author was long BA, although positions may change at any time.
This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
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 increase in stock price during the past year, 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 ($8.27 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 1.2%. 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.
- You can view the full analysis from the report here: BA Ratings Report
Marc Courtenay is a financial research analyst and the founder of Advanced Investor Technologies LLC as well as the publisher and editor of www.ChecktheMarkets.com.