Wednesday, January 16, 2013

Apple Yesterday ... Boeing Today?

Yesterday we commented on Apple's share price and why it may be an interesting time to consider buying its shares ("Time to Buy Apple Shares?).

So far today its share price has rebounded from ~$486 to ~$502 per share. Being lucky always beats being smart, at least in the short run.

So let's push our luck again today. From A as in Apple to B as in Boeing.

Boeing is a great company, as is Apple, and its shares have been pummeled lately, just like Apple's.

Boeing's Slump Continues: 'The Hits Just Keep Coming' says this:

"Boeing can’t catch a break.

An emergency landing in Japan late Tuesday of one of Boeing’s 787 Dreamliners prompted a voluntary grounding of two Dreamliner fleets, adding to the recent list of woes that have hindered the aerospace giant’s new generation of aircraft.

“The hits just keep coming for Boeing on operational 787 issues, with this grounding the most dramatic action we’ve seen yet,” says Robert Stallard, an analyst at RBC Capital Markets. “What started as a series of relatively minor, isolated incidents now threatens to overhang Boeing until it can return confidence.”

"Shares recently fell 3.5% to $74.27. The stock, which has had a choppy start to the year, is up 11% since June and roughly flat over the last 12 months.

Yesterday’s emergency landing followed a series of similar technical issues that occurred just days ago, including a fire on a plane in Boston.

“Alarms indicated smoke in the forward area of the plane, which houses batteries and other equipment, the airline said, and there was a “burning-like smell” in the cockpit and parts of the cabin. The plane landed at Takamatsu airport in western Japan, where the 129 passengers were evacuated using the plane’s emergency chutes. The plane also carried eight crew members.
“ANA said that the exact cause was still undetermined. The event was designated as a “serious incident” by Japan’s transport ministry, setting off an immediate investigation by the Japan Transport Safety Board, which dispatched a team to the scene.”

The latest incident prompted Goldman Sachs to remove Boeing from its “conviction list,” although it still retained its buy rating on Boeing. Goldman says it remains bullish on the fundamentals of the commercial aerospace sector, and thinks Boeing’s valuation is still attractive. That said:

“We also recognize that there have now been two incidents in a very short window pointing to potential issues related to one part – lithium ion batteries – and the concentration and possible overlap of cause within these events heightens the risk of a potentially more meaningful required change to the aircraft and therefore a possible delay in the pace of the production ramp. This would make near-term outperformance of shares more difficult to see.”

Other analysts are also growing increasingly frustrated. “We’d hoped recent 787 incidents were an aberration and that Boeing would overcome them relatively quickly,” Oppenheimer says. “But following yesterday’s incident…we think resolving recent issues will take not just time, but credible answers and prescriptions. The FAA’s investigation should provide these, but will take months.

“In the interim, BA is probably range-bound.”"

Summing Up

As a long term investor, I like Boeing very much.

And due to the "headline risk," its shares are down another 3% today. That said, they may stay low for some months to come as well.

Trying to catch a falling knife is hard to do, so short term traders beware. Long term investors should take a long look at establishing a position in the company.

Meanwhile, its current dividend yield is 2.6% and it's the best company in the worldwide commercial aerospace industry.

Boeing has a solid financial outlook and a world class management team as well.

Thanks. Bob.

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