Boeing's Stock a Buy? Analysts Say Its Price to Double

Jim Cramer dropped a bomb tonight on Mad Money. Claiming Aerospace will be the next bull market and that Boeing (BA) is THE stock to own in this pending growth in the industry.

His thought process is additionally reported in Jim Cramer's Mad Cap. Jim's thought process? Well, Jim Cramer has been predicting this move for a while now on the show. Boeing's new 787 will be unveiled at the Paris Air Show on June 16. Actually, Jim said "before the airshow". He expects the stock to react to the show.

More thoughts? Jim mentioned it briefly, on the show and possibly didn't give it enough of a headline. United Airlines is in the market for 150 new aircraft. Where the contract(s) haven't been awarded yet, it is expected that Boeing will win this contract or at least the majority of it. The Wall Street Journal suggested that United Airlines (UA) may be looking t replace more than 100 wide-body planes and an unsaid number of Boeing 757 single-aisle aircraft. United's strategy seems to be placing a very large order at the very inexpensive rates, expecting the bidders to battle very aggressively during the current economic recession.

Why does Jim think United Airlines will choose Boeing to build the planes? The current weakened U.S. dollar was the answer. United would get a better value for every dollar spent, making the new planes cheaper.

What about fundamentals? The fact is Boeing has been struggling for some time now. Even with that known, they still generate a lot of cash and have a pretty good balance sheet. I like to invest in companies that are debt free, and Boeing shows on their balance sheet 6.9 million in debt. They also show 9.2 million in cash and net receivables. I might be able to live with that, especially with a dividend yield of 3.4%.

Digging a bit further into my analysis, I found:

Current EPS: $2.87

10 yr EPS Growth Rate: 4.11%

Future EPS: $5.46

Determining the future value requires calculating the future P/E, which was difficult in this analysis. Typically the following numbers are not greatly different and I always use the lowest value for the future (10yr) P/E to determine future value.

Here are the numbers I came up with:

10yr Average P/E: 21.01

Current P/E: 17.38

Forward P/E (reported): 11.21

Rule #1 P/E (FEPS*2): 8.22

If I stick to my rules, I have to choose the lowest, 8.22. Resulting in a Future Stock Value of 44.88. Not very interesting anymore, huh? Well, I don't think it's accurate. Because of the state of the economy over the past few months and taking Boeing's struggles into consideration, due to no fault of their own, I have elected in this case to use the 10 year Average P/E for my analysis .Jim Cramer also stated that "Boeing's growth rates are too slow," claiming another catalyst for stock growth.

Future P/E: 21.01

Future (10yr) Value: 114.71

This still gives us a "sticker price" of just over $28, and if you live strictly by Phil Town's philosophy, you've got to cut that number in half again for your "Margin of Safety".

So now we have a decision to make. Boeing is around $50 today, the Paris Airshow coming up in 10 days, where the first catalyst will force the stock up. As the dollar continues to weaken in the recession, the odds of United Airlines awarding the majority of their building contracts to Boeing is very good and this would be a major catalyst for the company over the course of several years.

I am still undecided on this stock. The prospect of a 229% gain over 10 years is a 23% annual gain (average). Tempting...Why don't you give it some thought and send me what you think. If you missed the low earlier in the year ($29), you may think you're too late. But even if it recovered to its 52 week high of 78 would make a nice profit. I think the news is there and the fundamentals are pretty good, but not cut and dry. Give me your opinion on this one and whichever you decide, Jim Cramer's advice was to start accumulating the stock before the Paris Air Show when the stock should make its first trend of three or four upward.

Additional Companies and Stocks Affected by Boeing's Success or Failure

Allegheny Tech (ATI) - Manufactures the titanium skin.

Alcoa (AA) - Manufactures the fasteners.

United Technologies (UTX) - Manufactures the engines and engine components.

Give me your opinion! Participate in this poll!

Sources:

Wall Street Journal

Jim Cramer's Mad Cap

Phil Town's Investing Calculators

My Investing Strategy