Boeing (BA): Ready for takeoff

by Steve Christ, editor Wealth Daily

Boeing Co. (BA) currently has 863 orders for the “787 Dreamliner,” an aircraft that has yet to be truly delivered. If all goes according to plan, Japan's Nippon Airways will be the first company to take delivery of a Dreamliner at the end of this year.

Even after years of delays, Boeing's customer are lining up for the most sophisticated airliner yet as it inches closer to the finish line.

Assembled in Seattle, the Dreamliner is the first plane ever to have its entire fuselage made of carbon composites, rather than the familiar aluminum sheets that are riveted together.

That gives the plane a dramatic boost in speed and efficiency, allowing it use considerably less fuel. Clean and green, the Dreamliner burns 20% less fuel than a comparable aircraft — a huge plus in world where airlines are often rocked by fuel price increases.

What's more, the company declares each plane will likely have a 50-year lifespan, since there is so little metal used in the aircraft's construction.

But the biggest benefits of the new model may just belong to the passengers. According to Boeing, the Dreamliner boasts the following upgrades:

• Windows in the 787 are 65% larger and there are no mechanical shades. Instead, individual passengers can adjust the light levels via the window next to their seat from fully transparent to completely dark.

• Overhead storage bins are larger, making it less likely that you’ll have to store things under the seat in front of you.

• A better air filtration system with a gas filtration system removes odors and contaminants that can cause nose, throat, and eye irritation.

• Because the fuselage is constructed mainly of composite materials (instead of aluminum), the cabin can be pressurized to a lower altitude — 6,000 feet instead of 8,000 feet. This reduces the likelihood of discomfort and fatigue.

• Airline cabin air is typically very dry, in order to prevent corrosion in the aluminum airframe. Non-corroding composite material in the 787 means cabin air can have a higher level of humidity, which is more comfortable for passengers.

• New technology allows the 787’s wing control to anticipate and respond to turbulence, making for a smoother ride. Computer models show an eight-fold reduction in passengers experiencing motion sickness.

• Boeing promises a “quieter cabin” due to reduced engine and exhaust noise, a quieter air conditioning system, and less vibration.

Increased speed, efficiency, and the Dreamliner can make flying considerably more comfortable... So all in all, what's not to love?

The good news for Boeing is that its latest marvel is arriving as the industry is hitting a product replacement cycle, after two years of scraping the bottom in sales.

In fact — thanks to the action at the recent Farnborough Airshow — analysts now believe the battered industry is brewing for a comeback. Boeing logged 67 orders valued at $7.5 billion.

Meanwhile, Boeing forecast earlier this month that airlines would buy 30,900 planes over the next 20 years. That's a 6.5% increase over its previous estimate a year ago.

Due to in part to emerging market strength and the expansion of low-cost carriers, that represents a $3.6 trillion opportunity by 2029 — a 12.5% increase from the company's prior forecast.

That's one of the reasons I like Boeing Co. here as a long-term buy — even as the company hit some turbulence recently on a second quarter revenue miss. According to the release, total revenue fell 9% to $15.6 billion.

But despite this revenue miss, Boeing CEO Jim McNerney was decidedly upbeat: "With our commercial markets recovering, and the priorities of our government customers gaining clarity, we remain well positioned for growth in 2011 and beyond.”

On top of that, Boeing also reaffirmed its 2010 earning forecast of between $3.50 and $3.80 a share, while noting its backlog remains strong — with 3,304 airplanes valued at $252 billion.

The company went on to say it still expects to deliver between 460 and 465 commercial airplanes this year, including the first few 787s and 747-8s. Looking ahead, Boeing is poised to earn $4.95 a share in 2011. At just 15X earnings, this would yield a $74.25 share price.

So with a 2.4% dividend yield and a growing market ahead, Boeing is one stock to add to the wish list — especially on a pullback to the 200-day moving average. Much like the Dreamliner, this company is preparing for takeoff.

Learn more about this financial newsletter at Steve Christ's The Wealth Advisory.