The Boeing Co. (BA) reported fourth-quarter results Thursday that showed continued cost pressures as it relates to its pension obligations but more importantly a surging commercial aerospace backlog. We'll be evaluating our long-term assumptions for Boeing, but we don't expect to make a material change to our fair value estimate at this time.
We have little interest in opening up a position in Boeing in our Best Ideas portfolio, given its fairly valued status and the substantial execution risk embedded in achieving its aggressive commercial delivery schedule (and its at-risk defense exposure due to impending budget cuts). That said, we are very constructive on the commercial aerospace supply chain, as parts suppliers benefit from the implicit backing of Boeing and do not need customers to actually receive delivery of an aircraft to recognize revenue and profit. We hold three aerospace suppliers in the portfolio of our Best Ideas Newsletter -- Precision Castparts (PCP), Astronics (ATRO), and EDAC Tech (EDAC).
Boeing issued earnings-per-share guidance for 2012 that disappointed most investors due to higher pension expense, but we're most interested in Boeing's pace of orders and its ability to execute on higher production rates. Its commercial airplane segment booked 379 net orders during the quarter and 805 during the full year, pushing the backlog of unfulfilled deliveries to over 3,700 planes valued at $296 billion.
To put this in perspective, Boeing delivered 477 commercial aircraft during 2011, so its backlog of unfulfilled deliveries is nearly 8 times current production rates, providing increased visibility through the next economic cycle. In 2012, Boeing expects to deliver between 585 and 600 airplanes, nearly 26% growth at the high end. In fact, delivery slots for 2012 are sold out, and we'll likely witness the delivery of 35 to 40 787 Dreamliner deliveries to customers.
All things considered, we remain on the sidelines with respect to Boeing's shares and think the supply chain is a better way to play the coming upswing in commercial aerospace demand. Precision Castparts, Astronics, and EDAC Tech remain our top three aerospace picks.
Additional disclosure: PCP, ATRO, and EDAC are included in the portfolio of our Best Ideas Newsletter.