How Would The Boeing Co. (NYSE:BA) Face Defense Cut?
Recent positive reports by analysts firm “Canaccord Genuity” reflects the good run Boeing Co. (NYSE:BA) stock has had for the past year. The report highlights that this uptake is in spite of the enforcement of government regulations designed to further and protect consumer interests. The report also talked about healthy cash flows the firm has achieved and its judicious cash deployment. Current share price of the aircraft manufacturing firm indicate a 7.3% increase in value over the past 30 days. Analysts continue to be bullish about the growth prospects of this firm and have given a PT of $130 per share.
The aircraft and defense equipment maker is bracing itself to navigate through tough times that it is likely to face due to the expected defense spending cut. Analysts predict close to $1 trillion will be trimmed off the defense budget this year. This is over and above the year-on-year fall in business that Boeing is experiencing in its space, security and defense sectors. The three sectors contributed close to 50% of Boeings annual earnings in FY12. In what seems to be troubling signs of turmoil ahead, revenue from these three key verticals fell to 38% of its total revenue earnings during its most recently concluded quarter. Analysts predict further fall in revenue from these three sectors and predict that only 32% revenue by 2015, would come from these sectors.
In order to overcome the uncertainty in its U.S. market, Boeing has been attempting to garner a larger share of the emerging markets spend on aircrafts and defense equipment. Additionally, the firm expects to benefit from the cyclical upgrading program that its existing clients would be soon embarking on to replace their ageing fleets.
The share price of this aerospace behemoth with a market cap of $89.62 billion is trading at $118.80.