Why An Airbus Rate Increase Could Be Good For Boeing

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In a report published Friday, Gabelli & Company analyst James Foung maintained a Buy rating on
Boeing Co
BA
. John Leahy, the COO for customers at Airbus, indicated that the company is considering a further increase in the production of its single-aisle A320 aircraft to 60 per month. The company is currently had producing 42 A320s a month and expects to get to 46 per month in 2Q16 and to 50 a month in 1Q17. The decision to build more A320s may come before yearend. "We believe an Airbus rate increase would be positive for BA because we think the company would follow with a similar increase on its single aisle aircraft. Currently BA is producing the BA737 at 42 a month, then at 47 per month in 2017, and then at 52 a month in 2018," analyst James Foung said. In the report Gabelli & Company noted that, while considering such a higher rate, Boeing would need to think about several dynamics like: As of April 2015, Boeing had a backlog of 4,201 of its single aisle aircraft. Since airlines are currently requesting for accelerated deliveries, the company could use its strong backlog to achieve the 60 per month rate. It can continue to grow its backlog, driven by "favorable global air traffic trends, improving airline profitability and the need for more efficient airplanes," Foung wrote. Boeing's EPS is expected to grow to $8.35 in 2015 and to $9.60 in 2016. EPS could rise steadily to $14.60 in 2019. "We calculate that BA's private market value will reach $239 per share by 2019," Foung added.
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Posted In: Analyst ColorReiterationAnalyst RatingsGabelli & Company
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