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Despite solid numbers, analysts cautious about Boeing

Kimberly Adams Oct 21, 2015
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Third quarter earnings for the aerospace company Boeing are out on Wednesday. Boeing seems to be doing well, boosted by gains in the commercial side of its business. But just because the airlines are flush with cash due low oil prices doesn’t necessarily mean they are going to be using that money to buy lots of new planes.

Boeing operates in several aviation sectors, which can usually balance each other out. Right now, the part that sells planes to big airlines is doing pretty well, but there’s a catch.
Scott Hamilton is an aviation consultant with Leeham Company.

“The cash flow is still a good, healthy number,” he said of Boeing. “The profits are still coming in but the concern of many analysts on Wall Street is that the cash flow squeeze is around the corner.”

Boeing and its competitor Airbus have a backlog of orders that will take years to work through. So rather than buying new planes, many airlines are just maintaining the ones they have. Plus, the defense sector is slowing down in the U.S. Wayne Plucker is Director of Research for Aerospace and Defense with research firm Frost & Sullivan.

“And so the folks in St. Louis, the Boeing defense folks, are going to be challenged to justify jobs and to justify spending internally within the company,” he said.

However, Plucker said the quarterly earnings usually aren’t the best way to judge the overall health of the company.

“The quarterlies can be finagled, shall we say, to send whatever message you’d like,” said Plucker. He said annual reports are a much better indicator.

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