Aerospace and defense giant Boeing (NYSE: BA - News) recently posted decent fourth-quarter numbers followed by a weak future outlook. While that information could be useless out of context, a broader view will help in judging where the company stands at present. Here's an analysis of Boeing's strengths, weaknesses, opportunities, and threats which should help develop a more complete picture about the company.
Strengths
- Boeing bagged several valuable contracts in 2011. In December alone, the company signed deals valued at more than $33 billion and ended the year with a record order backlog worth $356 billion.
- Boeing's strong brand value gives it the required competitive edge. This has attracted loyal customers ranging from the U.S. Defense Department to countries such as Saudi Arabia.
- Boeing has a diversified product offering that comprises military and commercial aircraft sales. This gives the company a definite advantage over rivals Lockheed Martin and Northrop Grumman, which cater primarily to the defense segment.
Weaknesses
- Boeing's production capacity leaves it far behind in the race for deliveries as compared to European rival Airbus. In 2011, Airbus delivered 534 commercial planes, higher than the 477 planes delivered by Boeing.
- Boeing's higher-than-expected pension costs will weigh down on its profits this year. On average, the company expects to earn $4.15 per share in 2012, which is less than analyst expectations at $4.96 per share.
- Production of Boeing's much-awaited, fuel efficient 787 Dreamliner has already been delayed three years. This is likely to add to the company's mounting costs.
Opportunities
- Iranian tension is causing countries in the Middle East to beef up their arms stockpiles and Boeing would do well to cash in on these opportunities in the long run.
- Boeing's commercial aircraft sales have been growing rapidly, and it has tremendous scope to grow in future, given the strong demand in emerging markets such as India and China.
Threats
- The U.S. government will be cutting defense spending by more than $1 trillion over the next 10 years. This will pinch the profitability of all aerospace and defense companies, and Boeing is no exception.
The Foolish bottom line
After carefully weighing the pros and cons, Boeing looks strong to me given its reduced dependence on defense aircraft sales, coupled with the thriving commercial aircraft business. Click here to add Boeing to your watchlist to keep track of upcoming developments.
Navjot Kaur does not own shares of any of the companies mentioned in this article. The Motley Fool owns shares of Lockheed Martin and Northrop Grumman. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
There are no comments yet