A Look At Boeing's Commercial Orders And Deliveries In May 2016

| About: The Boeing (BA)

Summary

Boeing booked 125 orders in May.

Boeing delivered 71 aircraft, 7 less than monthly requirement to meet the target.

Book-to-bill ratio currently is .99.

As part of the annual order and delivery battle between Boeing (NYSE: BA) and Airbus ( OTCPK:EADSF/ OTCPK:EADSY) I provide a monthly overview and analysis. The April report can be read here. In this article, I will have a look at the orders and deliveries in May.

Orders

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Figure 1: Boeing deliveries up until May 2016 (Source)

In April Boeing booked 34 orders. April saw a bigger inflow boosted by a mega order: Boeing received 125 orders, 1 wide body orders and 124 narrow body orders.

  • FedEx (NYSE: FDX) ordered 1 Boeing 777, likely an option that has been firmed up
  • Vietjet Airlines ordered 100 Boeing 737 MAX 200 aircraft. The deal probably was in the works for months. A full analysis of the order can be read here.
  • 2 unidentified customers ordered 7 Boeing 737 MAX aircraft
  • Norwegian Air Shuttle ordered 8 Boeing 737 MAX aircraft, bringing their total number of orders for the type to 108.
  • Arik Air ordered 8 Boeing 737 MAX aircraft, becoming the 3rd African customer for the MAX
  • Japan Transocean Air ordered a single Boeing 737-800 airframe

At list prices the orders are valued $14.2bn, but after discounts the market value is closer to $6.8bn.

Compared to April 2015, order inflow rose sharply: 11 in 2015, versus 125 this year. During the first 5 months of 2016 Boeing received 298 orders versus 164 orders in the first 5 months of 2015, an 82% increase.

Deliveries

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Figure 2: Boeing deliveries (up until) May 2016 (Source: AeroAnalysis)

For 2016 Boeing guided slightly lower, reflecting lower production rate on the Boeing 747 program and the transition towards the Boeing 737MAX combined with a gap on the Boeing 737NG.

In May Boeing delivered 71 aircraft valued at $5.4bn:

  • Deliveries increased by 17 units, compared to last month
  • Split between narrow- and wide body deliveries was a 1:2 split, which also shows in the estimated market value of the deliveries.
  • No 767 deliveries in April
  • Korean Air took delivery of 1 Boeing 747-8I
  • Higher delivery volume is caused by higher delivery volume for the Boeing 737 (5) and 787 (2)
  • 14 Dreamliners were delivered, 8 of which were Boeing 787-9s. It can be concluded that the Boeing 787-9 will have the upper hand in the Dreamliner deliveries, which bodes well for Boeing as the aircraft has higher profit margins and brings in more cash.

Delivery volume was above the monthly average, compensating for lower deliveries in April. In order to reach its delivery target Boeing will need 63 deliveries per month for the remaining months this year.

Book-to-bill ratio

Just like in 2015, Boeing is targeting a 1:1 book-to-bill ratio. In May Boeing booked 125 orders and delivered 71 air frames, resulting in a book-to-bill ratio of 1.76. Year-to-date the book-to-bill ratio is .99, a strong increase since last month.

Conclusion

Figure 3: Wall Street Horizon -@WallStHorizon - Create your own custom event calendar today

The reported deliveries will have an impact on earnings that according to The Wall Street Horizon event calendar will be reported on the 27th of July before market-open.

  • Order inflow was strong, primarily boosted by a mega order from VietJet
  • Deliveries higher than expected, making up for a weak delivery volume in April
  • Boeing's book-to-bill ratio is .99, close to its target for 2016

In 2015, Boeing achieved its book-to-bill target at the very last moment. Despite lower anticipated deliveries in 2016, I expect Boeing to be facing a challenge to achieve its book-to-bill target. In April 2015, I published an article in which I said that the order books of jet makers are not bubbles, but should decline at some point. In that article I shared my thoughts and expected order inflow to decline in a few years from now. With oil prices having declined ever since, chances are the order books will decline sooner than I expected at first. With Boeing just barely meeting its target last year, 2016 might be the year in which Boeing will not achieve its book-to-bill ratio.

Boeing is currently on its desired book-to-bill ratio, but Boeing's marketing team still has to sell almost 450 aircraft to reach its target. However, given that orders tend to increase from Q3 and onwards it can be said that things are looking good for Boeing.

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Disclosure: I am/we are long BA.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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