Boeing's Conflicted Future: Why Are Insider Executives Selling?

Boeing (BA) announced that it has 514 orders for the 787 Dreamliner, the next generation passenger aircraft. Airbus is in a shambles and will not present a credible threat for quite some time. Nothing but blue sky and smooth flying, one would think.

The stock has rewarded investors very well. In early 2003 you could have acquired Boeing shares in the mid $20's. Now the stock trades around the $90 level. That's quite the run, and some investors could not be blamed for wondering about the future and what is truly left.

Institutions have been lightening their loads with a mild net distribution effect. At the $90 level, institutional interest would trump retail activity. But check out senior insider trading. There has been a very distinct sales process as options are exercised and the famous non open market sale kicks in. The senior guys do not need the cash. But it seems that almost every transaction is a disposition.

James McNerney Jr., Laurette Koellner and James Albaugh have all consistently and exclusively exercised and disposed of very large blocks of stock since the new year. This trio are the three top executives, of course, and their insights have to be the best there are. If they and other executives are personally arriving at the financial departure lounge with this magnitude of disposition then you should assume guidance has been given.

BA 1-yr chart

Comments

[todd.h.blecher:]

The information in this entry is incorrect. Boeing executives Jim McNerney, Jim Albaugh and Laurette Koellner haven't "consistently and exclusively exercised and disposed of very large blocks of stock since the new year." Neither is it correct to conclude that "If they and other executives are personally arriving at the financial departure lounge with this magnitude of disposition then you should assume guidance has been given."

CEO Jim McNerney has made no dispositions this year other than a Jan. 3 transaction in which 9,825 shares were disposed of for tax obligations on a grant of vested shares. Jim Albaugh sold 10,000 shares on Feb. 20, 2007 while Laurette Koellner disposed of roughly 24,000 shares, also in February. Those totals represent small fractions of their overall holdings.

What's more, Mr. McNerney is required to hold Boeing stock equal to six times his base salary, while Albaugh and Koellner are required to hold four times their base salary. All meet those requirements.

As of this week, 14 of the 25 Wall Street analysts following Boeing have buy-equivalent ratings on the stock. The consensus 12-month price target from the 25 analysts is $102 a share.


Todd Blecher
The Boeing Company
Corporate Communications
Chicago, IL

2007 Apr 05 03:56 PM