Analyst: 777 & Currencies Are Two Risks Associated With Boeing I Am Watching Closely

Shares of Boeing Co BA are up over 15p year to date on back of strong fourth-quarter results and the Street expects this trend to continue as the economy continues to show signs of growth.

Kenneth Herbert from Canaccord Genuity was on CNBC Tuesday to discuss the outlook and the risks associated with the stock.

“They reported very good results in January, the stock was up big that day, it was up big the second day 6 to 7p, which was very unusual,” Herebert said. “But no you have got $12 billion in cash for buybacks over the next two years. You have got backlogs that looks like it’s going to hold very strong and you have got continued strong fundamentals, people continue to fly. So, I think the backdrop is very favorable.”

Risks And Headwinds The Company Faces ?

“I think of risks in four buckets,” Herbert said. “First, Boeing has announced they are launching 777x, which is an upgrade to the 777 aircraft in order to avoid cutting rates, production rates on the 777. They need to sell about 50-60 of the planes for the next 3 to 4 years each year that’s certainly a risk if they have to cut rates on the 777 because it is a very profitable plane and a very significant contributor to cash.”

He continued, “You have got half the backlog that’s in Asia and Europe as airlines of course and leasing companies pay for aircrafts is dollars. So, as their local currency perhaps continue to weaken that’s certainly a risk and then I think about the defence budget as well, it looks likes you have got some stability there, but that’s certainly a risk also but clearly I would say the 777 and of course currencies are the two things I am watching [the closest] right now.”