Boeing: Five Causes for Concern

A month ago, I thought Boeing (BA) was one of the best domestic companies to invest in. Since then, however, the company has given me every reason to think it is positioned to tank:

1. Insider selling: Two sales and no buys in the last 10 weeks is a less than compelling, yet entirely negative indicator.
2. Jim Cramer: While I believe his intentions to be generally good and appreciate the diversification advice he gives to viewers, Mr. Cramer is subject to the same corporate sponsorship that "Chuck," "Heroes" and other NBC programs are. When a confident, easy going man looks like he's swallowing a whole apple while touting Boeing, I have no choice but to question his words as they squeak out like a prepubescent teen's.
3. More Paid for Promotion: Boeing gains no business through advertising on network television (747, anyone?). Why, then, would it spend money on fact-free, ideological commercials in the same vain domestic car companies did a year ago?
4. The 787: Boeing's new high-end plane hasn't tested well against Airbus' new luxury liner.
5. Bidding for the $10B United Airlines (UAUA) Contract: With an order from the airline at least half that size surely expected to go to Boeing this year, losing the contract poses more downside risk than the positive prospects associated with winning it. Furthermore, Airbus is ready to go while Boeing is still working out kinks.

Deduce what you will, but what I see is a large scale pump and dump.

Disclosure: No positions and none intended, long or short

Comments

[Elizabeth D.:]

"The military can afford to have much more thorough inspections of their laminates than the airlines can. Even so F-117s broke up in flight from delaminations. If an airline choses not to replace pitot tubes to save a buck do you think they're going to properly inspect the skin of an entire fuselage? I don't. They certainly didn't inspect the rudders. They didn't properly afix doublers after tail strikes either and on and on and on.... "

You really need a basic course in statistics. Compare the number of accidents caused by composite technology with the number of successful flights per day (heck, even narrow that down to the number of successful composite flights per day), and report back with the probability of getting in an accident.

"I'm thinking either you're a Boeing corporate shill or perhaps a SPEEA member. Either way, you'll have a job for life once these expanded and new wars get up to speed."

That's a pretty presumptuous thing to say, especially since my public profile pretty much says something entirely different.

Jun 09 01:52 PM

[User 357705:]

And apparently you are afflicted with the same disease endemic to all American women. A brand new graduate. Book learning. OK, good school. Add 35 years of real world experience and check back with me. Good luck in Michigan. Oh, why not Harvard?

Jun 09 02:00 PM

[Elizabeth D.:]

That's absolutely none of your business and completely irrelevant to the argument.

If I have to sacrifice logic for "35 years of real world experience," I'll stick with the logic.

Jun 09 02:09 PM

[User 357705:]

In 35 years you'll perhaps realize how you don't need to sacrifice logic only temper it with experience. Hopefully your future clients won't have to suffer your learning this. Good luck.

Jun 09 02:16 PM

[Elizabeth D.:]

Unfortunately, you are a poor poster boy for this philosophy.

Jun 09 02:19 PM

[User 357705:]

Thanks for the compliment! I haven't been called a poster boy for anything before! Haven't been called a boy for over forty years either. Thanks Lizzie!


On Jun 09 02:19 PM Elizabeth D. wrote:

> Unfortunately, you are a poor poster boy for this philosophy.

Jun 09 02:21 PM

[BeachRider:]

Mr. Furman.
If it is just a matter of wording, what do you deem the relevance of the 'Airbus Internal Documents' on the Boeing 787?

I read it as: EADS doesn't believe that the early-process for Boeing is going to be able to make enough carbon-fiber material for the eventual delivery of so-many planes.

The timing of this analysis is terrible.

Jun 09 02:30 PM

[Danny Furman:]

Mr. Rider,
Independent industry experts have published dozens of articles with the same information. Search away...

Jun 09 02:38 PM

[Crocodilian:]

Corporate image advertising rarely has much to do with stock price. Companies that rely on government contracts have a tremendous stake in image, particularly among policy elites.

Hence Archer Daniels Midland's sponsorship of Sunday AM political talk shows and PBS news, and Boeing's full page ads in the Economist.

You do know that Boeing is a major defense contractor, yes?

Boeing's corporate image building is much less about stock price, and much more about politics.

Jun 09 02:52 PM

[User 357705:]

Perhaps there is a tax reduction component as well.


On Jun 09 02:52 PM Crocodilian wrote:

> Corporate image advertising rarely has much to do with stock price.
> Companies that rely on government contracts have a tremendous stake
> in image, particularly among policy elites.
>
> Hence Archer Daniels Midland's sponsorship of Sunday AM political
> talk shows and PBS news, and Boeing's full page ads in the Economist.
>
>
> You do know that Boeing is a major defense contractor, yes?
>
> Boeing's corporate image building is much less about stock price,
> and much more about politics.

Jun 09 02:55 PM

[expat in China:]

I agree with Elizabeth!

The commercial airline industry is unprofitable and will never complete the inspections of laminates with the appropriate equipment and process until there is a few disasters and grounding forces compliance.

Jet manufactures will go the way of car companies when trying to compete with China's booming plane manufacturing infrastructure and Boeing survival will depend on military contracts.

Hey 35 years experience may have value if the corporation didn't peg you into a cubical for 25 of them. I would take an educated young innovative person over a 35 year vet anyday.

355775 fill in your bio or shut the fk up!

Jun 09 08:21 PM

[BeachRider:]

Mr. Furman,
What information are you talking about? Is there something wrong with the amount of carbon-fabric that they can get or is there something completely different wrong with the 787?

Why isn't this an important thing to you?

Jun 09 08:47 PM

[Danny Furman:]

It's not remotely important to me. This article is about disingenuous advertising. I'm shedding light on an obnoxiously hyped stock. Boeing has done nothing of substance to spike like it has lately. Do your own due diligence and base your investment decisions on that.

Jun 09 09:38 PM

[User 357705:]

Yeah? You'd rather have a young innovative pilot with 500 hours total time rather than one with 35 yrs experience and 8000 hours in type? Aren't you the brave one.

Jun 10 12:04 AM

[expat in China:]

357705,

OK I am no spring chicken either and at our age you may have to piss during an emergency.

Take care

Jun 10 02:02 AM

[Pew:]

Put your money where your mouth (typing) is.

Jun 10 02:07 AM

[Danny Furman:]

More wonderful news for shareholders: Travel Channel now airing Boeing commercials during "Bizarre Foods."

Jun 10 08:43 AM

[Rik Dickinson:]

EADS doen't have 35 years of experience building airliners. Enough said?

Jun 10 09:34 AM

[BIHOh[oh:]

Boeing is the number one aerospace company in the world and the number one exporter in the U.S. While countries like China struggle to reverse engineer 40 year old technology to make a metal airplane, Boeing has vaulted to the next generation of commercial aircraft using new design, materials and manufacturing processes. Boeing design / manufacturing / QA processes coupled with FAA oversight would never allow a product that would delaminate into the air. The fact that Boeing has spent extra time and billions of its own money shows they are determined to get it right the first time. Sales approaching 800 787’s prior to first flight validates Boeings product, substantially lower operating costs and point to point approach is in the sweet spot and nuts on. The economy has stalled globally, and possibly will never recover to what it once was making the Airbus behemoth a non-player just like the European SST was. All this adds up to making Boeing a favorable long term investment.
Only an idiot buys stock based on what they hear on a TV show.
Boeing advertises for the same reasons as any large company that has products which are not sold directly to the public (e.g., EADS, Northrop and Lockheed, Seimans); brand recognition, image, public awareness.
787 doesn’t test against the Airbus airplane. They are apples and oranges. The 787 tests against own test requirements and it is meeting all the requirements The 787 can’t be compared to any other commercial aircraft because there are none in the same ballpark. 787 is a game changer.
Boeing is always ready to sell airplanes. No kinks to work out in that process.

Jun 11 04:47 PM

[User 357705:]

787 = DeHaviland Comet


On Jun 11 04:47 PM User 430029 wrote:

> Boeing is the number one aerospace company in the world and the number
> one exporter in the U.S. While countries like China struggle to reverse
> engineer 40 year old technology to make a metal airplane, Boeing
> has vaulted to the next generation of commercial aircraft using new
> design, materials and manufacturing processes. Boeing design / manufacturing
> / QA processes coupled with FAA oversight would never allow a product
> that would delaminate into the air. The fact that Boeing has spent
> extra time and billions of its own money shows they are determined
> to get it right the first time. Sales approaching 800 787’s prior
> to first flight validates Boeings product, substantially lower operating
> costs and point to point approach is in the sweet spot and nuts on.
> The economy has stalled globally, and possibly will never recover
> to what it once was making the Airbus behemoth a non-player just
> like the European SST was. All this adds up to making Boeing a favorable
> long term investment.
> Only an idiot buys stock based on what they hear on a TV show.<br/>Boeing
> advertises for the same reasons as any large company that has products
> which are not sold directly to the public (e.g., EADS, Northrop
> and Lockheed, Seimans); brand recognition, image, public awareness.
>
> 787 doesn’t test against the Airbus airplane. They are apples and
> oranges. The 787 tests against own test requirements and it is meeting
> all the requirements The 787 can’t be compared to any other commercial
> aircraft because there are none in the same ballpark. 787 is a game
> changer.
> Boeing is always ready to sell airplanes. No kinks to work out in
> that process.

Jun 12 12:45 AM