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It takes a lot longer to make a 180-degree reversal in a 747 than in a zippy Lear jet. For


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, comparing its corporate 180 to turning around a 747 -- one of the jet maker's flagship products -- is all too apt.

Flashback to 1997, the lowest point in the company's history: Boeing had to shut down production lines when a plan to double production failed and the company reported its first quarterly loss in 50 years. Most of Wall Street and industry officials began writing the jet maker off for dead; the company began the laborious push to turn things around.

Since then Boeing has cleaned up its balance sheet, paring its staffing levels and pushing for fatter profit margins. The company has moved aggressively into the higher-end space and communications arena -- a move away from manufacturing, underscored in May by switching its headquarters from Seattle to Chicago.

But Boeing isn't out of the clouds. Its push to become an aerospace company has met with many obstacles, and it's still tied to the fortunes of the slow-growing commercial aircraft market. If bitter aircraft rival Airbus continues to clip at its heels (

see related story), and if a much-feared decline in jet orders comes to pass, Boeing may find its stock -- which soared 61% in 2000 on turnaround hopes -- may begin another descent.

"We're in the middle innings" of a turnaround, says Christopher Leavy, manager of

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Oppenheimer Value fund, which has 5.21% of its assets in Boeing.

Analysts expect the company to sustain mid-double-digit growth rates. The consensus estimate at

Zack's Investment Research

puts Boeing's earnings growth at 15.8% annually over the next five years. Operating margins have rebounded as well: After hitting a low of 2.3% in 1997, they reached 7.5% last year and climbed to 9.2% in first quarter 2001. The company has set a target in the double digits, though it has refused to name a specific number.

The company's efforts have won some unlikely supporters: Its second biggest institutional shareholder is growth shop


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, which controls 2.89% of Boeing.

Still, Boeing's facing tough going in its core business -- commercial aircraft, which supplies about 60% of its revenue. Over the next 20 years the company predicts growth in commercial passenger traffic will rise by only 4.8% annually. Near-term, things could get tough, too. Last year revenue for the $31 billion division dipped 19%. The drop-off signals what's likely the start of a cyclical slowdown, on the heels of several years of strong orders for new planes.

Air Raid From Europe

And after years of unquestioned Boeing leadership, European consortium Airbus has been chomping into market share -- in 1999, it sold more planes than Boeing (55% of net orders), though Boeing managed to get the upper hand again last year (54% of net orders).

Some analysts doubt Boeing's ability to withstand the fierce competition. "I'm skeptical about Boeing's optimism that it will be able to generate strong cash earnings growth and consistent earnings growth for long periods of time, basically because of the ever-intensifying dogfight between Boeing and Airbus," says Robert Friedman, an equity analyst at

Standard & Poor's

, who recommends investors avoid Boeing's stock. (Check out


recent story on the latest on the

Boeing vs. Airbus battle.)

Lost in Space?

The space and communications business, which the company has said should boost growth in the future, has so far generated unimpressive results. It reported a $323 million loss for year 2000, partly because of the high costs of satellite launch systems. Demand for satellite service has diminished in the past few years, along with investor enthusiasm. Satellite service providers




died flaming deaths, while


recently said it wouldn't make payments on debt.

Boeing can claim some success with its new Connexion service, which uses satellites to provide Internet service to airlines, having so far signed on at least four airlines as clients. But overall, performance at the unit has been somewhat disappointing. "Boeing has performed better than

Lockheed Martin

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the commercial space industry, but we believe it still faces a weak market with no end in sight," notes a recent report from

J.P. Morgan


Meanwhile, Boeing's military business is bound to benefit from a hike in the procurement budget, but no specifics will be known until the government's recommendations on the subject are released this fall. The company also finds out later this year if it has bested competitor Lockheed Martin to land the contract for the Joint Strike Fighter, worth hundreds of billions of dollars.

The Demand Issue

A near-term worry is that Boeing's stock price will suffer, as it always has, from a looming cyclical slowdown in the airline business. From the peak to the trough of the last order downturn between 1990 and 1995, Boeing's stock dropped nearly 30% while the


gained 37%. The stock now changes hands at 16.7 times earnings.

Though the company has a two-and-a-half-year backlog of commercial plane orders, it's susceptible to drops in demand. "Despite the company's increasing diversity of revenue sources," says a recent report from J.P. Morgan, "we do not believe that earnings growth or the stock could withstand the pressures that a 30-to-40% drop in production (which we believe is possible over the next few years) would bring upon them."

Still, stock pickers at the

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J.P. Morgan Growth and Income fund have seized on price dips to add to positions in the past few months.

"The stock may go through weakness in the summer, but the longer-term trend is very positive. Any weakness in the stock would seem more appealing to us," says Pedro Zevallos, an analyst for the fund.