[NYSE: BA]: The airline manufacturing business has over the years consolidated around a few large corporations. Right now, the market is fully in control of two companies The Boeing Company (NYSE: BA) and European plane maker, Airbus. That’s because, after Airbus purchased Bombardier, only one major lower tier company was left (Embraer), and it has now been acquired by Boeing. Boeing and Embraer have agreed on the terms of the deal and is only waiting for approval by the Brazilian government, and all signals are that it will be approved. That’s because the two companies have put in place measures to safeguard the concerns of the Brazilian government with regards to the military aircraft aspect of Embraer. Through this consolidation, Boeing and Airbus and can now take on emerging competitors in China and Russia from an even stronger position. This makes Boeing’s stock a potential growth stock, even as the market shows signs of a possible correction.
Boeing’s growth prospects are also boosted by the company’s core fundamentals. From a look at Boeings books, one thing that stands out is its growth in earnings. The company’s quarterly earnings growth (yoy) stands at 30.60%. This is a big deal and indicates that Boeing’s market presence is getting stronger relative to its competitors. It’s a good indicator that in spite of weakness in the stock markets due to multiple factors in the global business environment.
Another interesting facet to The Boeing Company (NYSE: BA) is that, in spite of operating in a capital-intensive market, Boeing has a high levered free capital. The company’s levered free capital stands at $7.93 billion. This is an indicator that after meeting all its obligations, Boeing has free capital that it can leverage on to make investments and cushion itself from market shocks. This cash is also important because it gives the company leverage to gain an edge against emerging competition from China and Russia. That’s because, Chinese companies, tend to have an element of state backing to them.
Therefore, with a high levered free capital, Boeing stands in a good position to beat the competition. Its strong cash position is backed by its brand recognition in the market. Boeing is one of the most recognized brands in the market, alongside Airbus, which creates a barrier to entry for newer entrants, even when they have state backing to them.
Boeing also has an above average profit margin of 10.41%. This is an indicator that on top of operating in a high capital, high barriers to entry market, Boeing is making efficient use of its capital, and leveraging on its core strengths to make high profits from its sales.
Based on all the above factors, The Boeing Company (NYSE: BA) stands out as a company that offers a good combination of growth and stability. Even if the stock markets were to correct, Boeing is one of the company’s that may not lose much. It’s a strategic company whose continued success is important even at a geopolitical level, especially now that Chinese plane makers are gaining traction in the market.