BUY HOLD SELL A+ A A- B+ B B- C+ C C- D+ D D- E+ E E- F BUY December 17, 2017 BUY RATING SINCE 07/27/2017 TARGET PRICE $385.72 BUSINESS DESCRIPTION The Boeing Company, together with its subsidiaries, designs, develops, manufactures, sells, services, and supports commercial jetliners, military aircraft, satellites, missile defense, human space flight, and launch systems and services worldwide. STOCK PERFORMANCE (%) 3 Mo. 1 Yr. 3 Yr (Ann) Price Change 19.83 90.25 34.50 GROWTH (%) Last Qtr 12 Mo. 3 Yr CAGR Revenues 1.71-3.75 0.45 Net Income -18.70 56.08 8.70 EPS -15.00 65.60 15.89 RETURN ON EQUITY (%) Ind Avg S&P 500 Q3 2017 616.57 238.18 13.41 Q3 2016 205.36 94.17 11.79 Q3 2015 83.32 58.76 12.91 Sector: Industrials Sub-Industry: Aerospace & Defense Source: S&P Weekly Price: (US$) SMA (50) SMA (100) 1 Year 2 Years Rating History BUY HOLD BUY HOLD BUY Volume in Millions 2016 2017 COMPUSTAT for Price and Volume, TheStreet Ratings, Inc. for Rating History TARGET PRICE $385.72 400 350 300 250 200 150 100 75 50 25 0 P/E COMPARISON RECOMMENDATION We rate () a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any nesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its solid stock price performance, revenue growth, notable return on equity and good cash flow from operations. We feel its strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated. 27.01 EPS ANALYSIS¹ ($) 24.97 Ind Avg 25.50 S&P 500 HIGHLIGHTS Compared to its closing price of one year ago, 's share price has jumped by 90.25%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year. 's revenue growth trails the industry average of 13.4%. Since the same quarter one year prior, revenues slightly increased by 1.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share. Q1 1.87 Q2 1.59 Q3 2.47 Q4 1.51 Q1 1.83 Q2-0.37 Q3 3.60 Q4 2.59 Q1 2.34 Q2 2.89 Q3 3.06 The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Aerospace & Defense industry and the overall market, 's return on equity significantly exceeds that of both the industry average and the S&P 500. 2015 2016 NA = not available NM = not meaningful 2017 1 Compustat fiscal year convention is used for all fundamental data items. Net operating cash flow has slightly increased to $3,396.00 million or 6.05% when compared to the same quarter last year. Despite an increase in cash flow, 's average is still marginally south of the industry average growth rate of 13.37%. 's earnings per share declined by 15.0% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, increased its bottom line by earning $7.65 versus $7.44 in the prior year. This year, the market expects an improvement in earnings ($10.15 versus $7.65). PAGE 1
PEER GROUP ANALYSIS REVENUE GROWTH AND EBITDA MARGIN* Revenue Growth (TTM) -5% 30% LLL UNFAVORABLE TXT LMT NOC HII RTN GD 10% EBITDA Margin (TTM) UTX FAVORABLE COL 25% Companies with higher EBITDA margins and revenue growth rates are outperforming companies with lower EBITDA margins and revenue growth rates. Companies for this scatter plot have a market capitalization between $10.6 Billion and $175 Billion. Companies with NA or NM values do not appear. *EBITDA Earnings Before Interest, Taxes, Depreciation and Amortization. REVENUE GROWTH AND EARNINGS YIELD Revenue Growth (TTM) -5% 30% TDG COL UNFAVORABLE LMT LLL 3% Earnings Yield (TTM) NOC RTN TXT FAVORABLE UTX GD HII Companies that exhibit both a high earnings yield and high revenue growth are generally more attractive than companies with low revenue growth and low earnings yield. Companies for this scatter plot have revenue growth rates between -3.8% and 29.7%. Companies with NA or NM values do not appear. 6% INDUSTRY ANALYSIS The aerospace and defense (A&D) industry provides defense, space, homeland security, and information technology products. The aerospace industry is driven by the overall economic climate while the defense industry is driven by the U.S. military budget and the global political landscape. The profitability of individual companies depends on technical expertise and their ability to secure long-term contracts. The industry is highly concentrated and largely dependent on federal government spending. It is cyclical and unpredictable due to uncertainty of the annual government budgeting process and election cycles. The US A&D market has performed well in recent years due to an increased defense budget to fight terrorist groups in the Middle East. These budget increases have countered the declining civil aerospace sector, which saw a downturn in the end-user airline industry after the 9/11 terrorist attacks. UK and European companies are actively seeking a broader US footprint. Softness in the US dollar has rendered American companies particularly attractive to international buyers and the regulatory environment has been supportive. Second and third-tier suppliers are aggressively looking to consolidate operations and expand capacity. Demand for advanced and innovative products has surged, especially in the realm of robotics including unmanned aerial vehicles. This A&D manufacturing supply network is shifting from products to solutions and from assets to the implementation of those assets to provide maximum flexibility for meeting strategic objectives. In response to escalating cost pressures from airlines and reduced capacity of the aerospace industry, aircraft manufacturing companies have begun to concentrate their production efforts on the defense industry to exploit growing military spending and maintain revenue streams. Final production runs of the F/A 22 gave way to cost overruns in the development of the various F-35 Joint Strike Fighter configurations. The plan for the US missile defense network were changed but not eliminated under the Obama administration boosting business for the leading players in the industry. As NASA continues to develop a next-generation space vehicle, the demand for a publicly accessible space platform has prompted initiatives within the aerospace sector to produce a viable option. While the development of high-speed rocket replacement technologies, such as scramjet engines, could usher in a new era of space and air transport sometime in the future, in the present they are areas of research being funded. PEER GROUP: Aerospace & Defense Recent Market Price/ Net Sales Net Income Ticker Company Name Price ($) Cap ($M) Earnings TTM ($M) TTM ($M) 293.88 175,029 27.01 91,310.00 6,696.00 UTX UNITED TECHNOLOGIES CORP 123.76 98,831 19.16 59,201.00 5,168.00 LMT LOCKHEED MARTIN CORP 317.01 90,898 25.71 49,663.00 3,632.00 GD GENERAL DYNAMICS CORP 196.22 58,588 19.49 30,929.00 3,073.00 RTN RAYTHEON CO 188.78 54,574 25.41 24,803.00 2,175.00 NOC NORTHROP GRUMMAN CORP 306.91 53,427 22.87 25,566.00 2,362.00 COL ROCKWELL COLLINS INC 133.71 21,901 27.97 6,822.00 705.00 LLL L3 TECHNOLOGIES INC 192.41 15,035 26.43 11,036.00 576.00 TXT TEXTRON INC 54.38 14,325 23.44 14,006.00 627.00 TDG TRANSDIGM GROUP INC 274.48 14,262 32.29 3,504.29 596.89 HII HUNTINGTON INGALLS IND INC 233.88 10,586 17.66 7,367.00 612.00 The peer group comparison is based on Major Aerospace & Defense companies of comparable size. PAGE 2
COMPANY DESCRIPTION The Boeing Company, together with its subsidiaries, designs, develops, manufactures, sells, services, and supports commercial jetliners, military aircraft, satellites, missile defense, human space flight, and launch systems and services worldwide. It operates in five segments: Commercial Airplanes, Boeing Military Aircraft, Network & Space Systems, Global Services & Support, and Boeing Capital. The Commercial Airplanes segment develops, produces, and markets commercial jet aircraft for various passenger and cargo requirements; and provides related support services to the commercial airline industry. This segment also offers aviation services support, aircraft modifications, spare parts, training, maintenance documents, and technical advice to commercial and government customers. The Boeing Military Aircraft segment researches, develops, produces, and modifies manned and unmanned military aircraft, and weapons systems for global strike, vertical lift, and autonomous systems, as well as mobility, surveillance, and engagement. The Network & Space Systems segment researches, develops, produces, and modifies strategic defense and intelligence systems, satellite systems, and space exploration products. The Global Services & Support segment provides integrated logistics services comprising supply chain management and engineering support; maintenance, modification, and upgrades for aircraft; and training systems and government services that include pilot and maintenance training. The Boeing Capital segment offers financing services and manages financing exposure for a portfolio of equipment under operating and finance leases, notes and other receivables, assets held for sale or re-lease, and investments. The company was founded in 1916 and is headquartered in Chicago, Illinois. 100 North Riverside Chicago, IL 60606 USA Phone: 312-544-2000 http://www.boeing.com Employees: 151000 STOCK-AT-A-GLANCE Below is a summary of the major fundamental and technical factors we consider when determining our overall recommendation of shares. It is provided in order to give you a deeper understanding of our rating methodology as well as to paint a more complete picture of a stock's strengths and nesses. It is important to note, however, that these factors only tell part of the story. To gain an even more comprehensive understanding of our stance on the stock, these factors must be assessed in combination with the stock s valuation. Please refer to our Valuation section on page 5 for further information. FACTOR SCORE Growth 4.0 out of 5 stars Measures the growth of both the company's income statement and cash flow. On this factor, has a growth score better than 70% of the stocks we rate. Total Return 5.0 out of 5 stars Measures the historical price movement of the stock. The stock performance of this company has beaten 90% of the companies we cover. Efficiency 5.0 out of 5 stars Measures the strength and historic growth of a company's return on invested capital. The company has generated more income per dollar of capital than 90% of the companies we review. Price volatility 5.0 out of 5 stars Measures the volatility of the company's stock price historically. The stock is less volatile than 90% of the stocks we monitor. Solvency 2.0 out of 5 stars Measures the solvency of the company based on several ratios. The company is more solvent than 30% of the companies we analyze. Income 4.0 out of 5 stars Measures dividend yield and payouts to shareholders. The company's dividend is higher than 70% of the companies we track. THESTREET RATINGS RESEARCH METHODOLOGY TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to perform against a general benchmark of the equities market and interest rates. While our model is quantitative, it utilizes both subjective and objective elements. For instance, subjective elements include expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings. Objective elements include volatility of past operating revenues, financial strength, and company cash flows. Our model gauges the relationship between risk and reward in several ways, including: the pricing drawdown as compared to potential profit volatility, i.e.how much one is willing to risk in order to earn profits; the level of acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's performance. These and many more derived observations are then combined, ranked, weighted, and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of selecting stocks. PAGE 3
Consensus EPS Estimates² ($) IBES consensus estimates are provided by Thomson Financial FINANCIAL ANALYSIS 's gross profit margin for the third quarter of its fiscal year 2017 has increased when compared to the same period a year ago. Even though sales increased, the net income has decreased. has very liquidity. Currently, the Quick Ratio is 0.39 which clearly shows a lack of ability to cover short-term cash needs. The company's liquidity has decreased from the same period last year. 2.89 Q4 FY17 10.15 E 2017(E) 11.07 E 2018(E) At the same time, stockholders' equity ("net worth") has significantly decreased by 48.01% from the same quarter last year. The key liquidity measurements indicate that the company is in a position in which financial difficulties could develop in the near future. STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. To learn more visit www.thestreetratings.com. INCOME STATEMENT Net Sales ($mil) 24,309.00 23,898.00 EBITDA ($mil) 3,189.00 2,702.00 EBIT ($mil) 2,667.00 2,228.00 Net Income ($mil) 1,853.00 2,279.00 LANCE SHEET Cash & Equiv. ($mil) 10,032.00 9,668.00 Total Assets ($mil) 91,007.00 88,950.00 Total Debt ($mil) 10,768.00 10,456.00 Equity ($mil) 1,086.00 2,089.00 PROFITABILITY Gross Profit Margin 20.04% 18.75% EBITDA Margin 13.11% 11.30% Operating Margin 10.97% 9.32% Sales Turnover 1.00 1.07 Return on Assets 7.35% 4.82% Return on Equity 616.57% 205.36% DEBT Current Ratio 1.18 1.28 Debt/Capital 0.91 0.83 Interest Expense 136.00 142.00 Interest Coverage 19.61 15.69 SHARE DATA Shares outstanding (mil) 597 619 Div / share 1.42 1.09 EPS 3.06 3.60 Book value / share 1.82 3.38 Institutional Own % NA NA Avg Daily Volume 3,224,710 3,660,487 2 Sum of quarterly figures may not match annual estimates due to use of median consensus estimates. PAGE 4
RATINGS HISTORY Our rating for has not changed since 7/27/2017. As of 12/14/2017, the stock was trading at a price of which is 1.0% below its 52-week high of $296.82 and 92.0% above its 52-week low of $153.06. 2 Year Chart BUY: $143.00 2016 HOLD: $133.01 BUY: $143.31 HOLD: $169.12 BUY: $241.00 $300 $250 $200 $150 MOST RECENT RATINGS CHANGES Date Price Action From To 7/27/17 $241.00 Upgrade Hold Buy 1/26/17 $169.12 Downgrade Buy Hold 10/27/16 $143.31 Upgrade Hold Buy 7/28/16 $133.01 Downgrade Buy Hold 12/14/15 $143.00 No Change Buy Buy Price reflects the closing price as of the date listed, if available RATINGS DEFINITIONS & DISTRIBUTION OF THESTREET RATINGS (as of 12/14/2017) 44.62% Buy - We believe that this stock has the opportunity to appreciate and produce a total return of more than 10% over the next 12 months. 30.32% Hold - We do not believe this stock offers conclusive evidence to warrant the purchase or sale of shares at this time and that its likelihood of positive total return is roughly in balance with the risk of loss. 25.06% Sell - We believe that this stock is likely to decline by more than 10% over the next 12 months, with the risk involved too great to compensate for any possible returns. TheStreet Ratings 14 Wall Street, 15th Floor New York, NY 10005 www.thestreet.com Research Contact: 212-321-5381 Sales Contact: 866-321-8726 VALUATION BUY. The current P/E ratio indicates a premium compared to an average of 24.97 for the Aerospace & Defense industry and a value on par with the S&P 500 average of 25.50. For additional comparison, its price-to-book ratio of 161.65 indicates a significant premium versus the S&P 500 average of 3.24 and a significant premium versus the industry average of 48.79. The price-to-sales ratio is below both the S&P 500 average and the industry average, indicating a discount. After reviewing these and other key valuation criteria, proves to trade at a premium to investment alternatives within the industry. Price/Earnings 27.01 Peers 24.97 Average. An average P/E ratio can signify an industry neutral price for a stock and an average growth expectation. is trading at a valuation on par with its peers. Price/Projected Earnings 26.55 Peers 24.59 Premium. A higher price-to-projected earnings ratio than its peers can signify a more expensive stock or higher future growth expectations. is trading at a premium to its peers. Price/Book 161.65 Peers 48.79 Premium. A higher price-to-book ratio makes a stock less attractive to investors seeking stocks with lower market values per dollar of equity on the balance sheet. is trading at a significant premium to its peers. Price/Sales 1.92 Peers 1.99 Average. In the absence of P/E and P/B multiples, the price-to-sales ratio can display the value investors are placing on each dollar of sales. is trading at a valuation on par with its industry on this measurement. DISCLAIMER: Price/CashFlow 13.30 Peers 21.43 Discount. The P/CF ratio, a stock s price divided by the company's cash flow from operations, is useful for comparing companies with different capital requirements or financing structures. is trading at a significant discount to its peers. Price to Earnings/Growth 0.81 Peers 3.38 Discount. The PEG ratio is the stock s P/E divided by the consensus estimate of long-term earnings growth. Faster growth can justify higher price multiples. trades at a significant discount to its peers. Earnings Growth lower higher 65.60 Peers 28.93 Higher. Elevated earnings growth rates can lead to capital appreciation and justify higher price-to-earnings ratios. is expected to have an earnings growth rate that significantly exceeds its peers. Sales Growth lower higher -3.75 Peers 4.07 Lower. A sales growth rate that trails the industry implies that a company is losing market share. significantly trails its peers on the basis of sales growth The opinions and information contained herein have been obtained or derived from sources believed to be reliable, but TheStreet Ratings cannot guarantee its accuracy and completeness, and that of the opinions based thereon. Data is provided via the COMPUSTAT Xpressfeed product from Standard &Poor's, a division of The McGraw-Hill Companies, Inc., as well as other third-party data providers. TheStreet Ratings is a division of TheStreet, Inc., which is a publisher. This research report contains opinions and is provided for informational purposes only. You should not rely solely upon the research herein for purposes of transacting securities or other investments, and you are encouraged to conduct your own research and due diligence, and to seek the advice of a qualified securities professional, before you make any investment. None of the information contained in this report constitutes, or is intended to constitute a recommendation by TheStreet Ratings of any particular security or trading strategy or a determination by TheStreet Ratings that any security or trading strategy is suitable for any specific person. To the extent any of the information contained herein may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person. Your use of this report is governed by TheStreet, Inc.'s Terms of Use found at http://www.thestreet.com/static/about/terms-of-use.html. PAGE 5