Airbus Leads As Top Aircraft Producer, But Boeing Could Be A Better Value

Includes: BA, LUV
by: Benzinga

Airbus continues to lead Boeing (NYSE:BA) with a 53% market share after delivering 534 passenger jets in 2011. The results mean that Airbus exceeded its target of 520 to 530 aircraft. The European company overtook Boeing in 2003 and has maintained its lead since then. However, Boeing has benefited from an expansion in global air travel alongside its European competitor.

Like its European competitor, Boeing has experienced an uptick in airplane orders, with a 10% raise of commercial airplane deliveries to 128 for Q4 2011. For the year, the company delivered 477 aircraft, up from 462 on the previous year.

Boeing has also had its orders increase by 52% over last year, with 805 orders for new aircraft, creating a backlog, especially for its popular 737 jet. Its backlog at the end of 2011 was 3,771 commercial orders.

Demand for Boeing jets is expected to increase steadily after it unveiled the 737 Max - a fuel-efficient model that is expected to enter service in 2017. Southwest Airlines (NYSE:LUV) has ordered 150 Max planes and the company has announced other customers have committed to about 1,000 more. The company is also planning to ramp up production of its 737 line to 35 aircraft per month, which is set to grown to 38 per month in Q2 2013 and 42 per month in Q1 2014.

The company is also ramping up production of its new 787 model. Air France-KLM has already closed a deal to order 25 of the new jets from Boeing.

Despite the company's enormous backlog, Boeing has maintained a sustainable level of earnings growth in 2011, with earnings per share climbing from 78 cents a share in Q1 2011 to $1.46 in Q3 2011. That near doubling of the stock's EPS reflects both growth in revenue, which reached $17.7 billion in Q3 2011, and the stock price's failure to grow relative to the company's increased profits. This is largely because the company's stock price has remained locked to the larger market, so when the Dow Jones Index fell 8% in August, Boeing fell 16% even as it was reporting greater earnings and a higher profit margin. The company's P/E ratio has fallen to 14.83.

While Airbus also fell, the stock is up over 22% Thursday from the beginning of 2011 in a closer reflection of the company's increased earnings and profits. Airbus fell only around 4% last summer when the Dow Jones fell 8%, and the stock has maintained a relatively narrow 52 week range of between $18.28 and $25.57 per share.

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