A year ago I thought that Boeing (NYSE:BA)
looked undervalued and ready to outperform as investors bought in to
the company's considerable commercial ramp. Since then, the stock is up
about 20% and although worries about batteries on the 787 did create
some headaches, the company remains in good shape with respect to its
market share and backlog. I still believe that Boeing should sport a
triple-digit stock price and though I won't ignore the risks of a major
macroeconomic slowdown, I think the biggest concerns for Boeing are now
reaching cost/profit targets and how to use the considerable sums of
cash it will generate.
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Showing posts with label Embraer. Show all posts
Showing posts with label Embraer. Show all posts
Wednesday, April 24, 2013
Monday, April 30, 2012
Investopedia: Orders Will Be The Wind Beneath Boeing's Wings
The run in commercial aerospace is on, and both Boeing (NYSE:BA) and EADS'
Airbus will be spending the next few years delivering on an incredible
backlog of commercial aviation orders. While there is still some reason
to worry about the quality of the emerging market order book, Boeing has
a rare opportunity to book several banner years of revenue and cash flow.
Read more here:
http://stocks.investopedia.
Read more here:
http://stocks.investopedia.
Monday, October 31, 2011
Investopedia: Bulls Onboard Boeing
The stock of American aircraft giant The Boeing (NYSE: BA) seems to always be in "hurry up and wait" mode. Investors and analysts always seem to be more interested in the cycle to come than in the business today. Of course investing is a forward-looking endeavor, but it looks like the long-awaited good times at Boeing are in sight at last.
A Respectable Third Quarter
The good times are close at hand for Boeing, but not exactly here yet. Revenue rose just 4% in the third quarter, as relatively better sales (up 9%) in commercial aerospace offset flat results in the defense business. Within defense, Boeing balanced increased military aircraft revenue with declines in space and service and support revenue.
Read more here:
http://stocks.investopedia.
Monday, September 19, 2011
Investopedia: Will United Technologies Land Goodrich?
The economy may be slowing and Europe may still be smoldering, but none of that precludes good ol' fashioned buyout speculation. The latest big-deal rumors swirl through the aerospace industry, where United Technologies (NYSE:UTX) is widely rumored to be trying to strike a deal to acquire aircraft parts and components manufacturer Goodrich (NYSE:GR).
The Deal That May Be
If rumors are true, United Technologies has been busy lining up many billions in financing to launch a bid (rumors range from $10 billion to $20 billion). As it pertains to Goodrich, the target price for a deal seems to be in the range of $110 to $125 - prices that would be from 18 to 35% higher than Friday's close (a close that was bolstered by the deal rumors hitting the market on Friday).
Taking the midpoint of that range, United Technologies would be paying about 12 times trailing EBITDA for Goodrich. Though there have not been major aerospace deals in a while, that price would not be out of line for a deal like this; it overvalues Goodrich on a standalone basis, but United Technologies should be able to pull multiple operating synergies out of the deal, as well as expand into new market opportunities.
Read the full piece here:
http://stocks.investopedia.
The Deal That May Be
If rumors are true, United Technologies has been busy lining up many billions in financing to launch a bid (rumors range from $10 billion to $20 billion). As it pertains to Goodrich, the target price for a deal seems to be in the range of $110 to $125 - prices that would be from 18 to 35% higher than Friday's close (a close that was bolstered by the deal rumors hitting the market on Friday).
Taking the midpoint of that range, United Technologies would be paying about 12 times trailing EBITDA for Goodrich. Though there have not been major aerospace deals in a while, that price would not be out of line for a deal like this; it overvalues Goodrich on a standalone basis, but United Technologies should be able to pull multiple operating synergies out of the deal, as well as expand into new market opportunities.
Read the full piece here:
http://stocks.investopedia.
Tuesday, April 5, 2011
Investopedia: Will Brazil's Government Ruin A Good Thing?
CEOs come and go, but sometimes the circumstances matter. That is especially true in the case of Brazilian mining giant Vale (Nasdaq:VALE), which has recently announced that its CEO, Roger Agnelli, will be stepping down.
This is not a case of a CEO leaving for a better opportunity, "to spend more time with family," or to enjoy a well-earned retirement. Instead, Vale's CEO is basically being run off by the Brazilian government, who apparently wants a more pliable and compliant executive running one of the country's largest companies.
Not only is this a serious matter for Vale shareholders, who are losing out on the continued leadership of an executive who was at the very least competent, but it is a serious matter for all investors with an interest in Brazil. While there can be a healthy and spirited debate about the balance between public and private interests, direct interference in a publicly-run company sets a dangerous precedent and Brazil's government had better be careful or risk falling out of favor in many investors' eyes. (For related reading, see Cautionary Signs For International Investors.)
To read more, please click below:
http://stocks.investopedia.
This is not a case of a CEO leaving for a better opportunity, "to spend more time with family," or to enjoy a well-earned retirement. Instead, Vale's CEO is basically being run off by the Brazilian government, who apparently wants a more pliable and compliant executive running one of the country's largest companies.
Not only is this a serious matter for Vale shareholders, who are losing out on the continued leadership of an executive who was at the very least competent, but it is a serious matter for all investors with an interest in Brazil. While there can be a healthy and spirited debate about the balance between public and private interests, direct interference in a publicly-run company sets a dangerous precedent and Brazil's government had better be careful or risk falling out of favor in many investors' eyes. (For related reading, see Cautionary Signs For International Investors.)
To read more, please click below:
http://stocks.investopedia.
Sunday, January 23, 2011
The Curious Case Of Brazil And Turkey
I do not spend all that much time talking about economics, monetary policy, and the like, but I am making an exception to talk about an interesting “compare and contrast” situation in the emerging markets. Specifically, I find it very interesting to see the unusual monetary policy being pursued by Turkey vis a vis other large emerging economies like Brazil.
High Growth, Lower Rates
Turkey is currently enjoying some of the best growth in Europe, coming in at about 8% for 2010. In most cases, that sort of growth would have policymakers nervous about inflation and looking to hike rates to cool things off. After all, that's what's going on in countries like Poland, Hungary, China, and Brazil right now.
Turkey is handling things quite a bit differently though, and lowering rates. Last week, Turkey's central bank cut rates by 25bp (to 6.25%) after cutting them 50bp back in December. At the same time, the country is raising banks' reserve requirements.
The idea here, then, is to deter yield-shoppers and limit the inflow of speculative/investment capital. Unfortunately, world markets do not usually react well to the unorthodox or the unexpected, and Turkey's actions are both – Turkey's central bank has been pretty cagey and this last rate move took the market by surprise. Moreover, a lot of economists and commentators believe that Turkey will botch this delicate balancing act and that the tougher reserve requirements won't offset the stimulation of lower rates and that this will this ramp up credit growth and stoke inflation.
What might be helping embolden Turkey's officials is the fact that inflation is very low by Turkish standards – about 6.4% in December. On the flip side, the ballooning current account deficit is a real concern, standing as it does at over 7.5% for the last period I could find data. Given that higher rates do not always produce their desired consequences, it is a credible (if very unorthodox) approach for Turkey to try.
That said, this unorthodox policy is certainly not helping Turkey's financial sector and major banks like Garanti (Nasdaq: TKGBY), Akbank (Nasdaq: AKBTY), and Yapi. All of those stocks have taken a smacking lately, as has the stock of Turkcell (NYSE: TKC). If Turkey's central bank is ultimately proven right, this could be a great buying opportunity in one of my favorite markets. If this “low rate in the face of high growth” policy backfires, though, it could take years to sort out the damage.
Brazil Going The Conventional Route
While Turkey is trying something new, Brazil is sticking to the old pattern. Brazil recently bumped its interest rate up 50bp to 11.25%, due in no small part to concerns about inflation. While Turkey has had bouts of high inflation before, it doesn't have the same history of some truly rampant hyper-inflation periods like Brazil does. Consequently, it is hard for me to imagine Brazil's central bank ever being cavalier about the risks of inflation. Unlike Turkey, Brazil also has much less to worry about in terms of its current account balance and the impact of capital inflows.
Not surprisingly, though, this round of tightening hasn't been great news for Brazilian bank stocks like Itau (Nasdaq: ITAU) or Banco Bradesco (NYSE: BBD). On the other hand, it has made virtually no difference for major exporters like Embraer (NYSE: ERJ) and Vale (Nasdaq: VALE). And then you have the broader market ETFs like the iShares Brazil Index (NYSE: EWZ) and Market Vectors Brazil Small-Cap ETF (NYSE: BRF) – with a mix of exporters and more domestically-oriented stocks, these have traded lower, but not to the same extent as the financials.
It will be interesting to see how these two countries' policies play out. Clearly there are very different circumstances for each economy – Brazil is highly leveraged to China's development and appetite for raw materials, while Turkey is keenly exposed to Europe's health and demand for lower-cost manufactured imports. Nevertheless, Brazil runs the risk of choking off growth at time when it really needs to be using the windfall of commodity exports to develop a more balanced and sustainable economy. On the other hand, Turkey is not endangering its growth, but may well be risking its future stability.
The Bottom Line
I do not want to sound too cavalier about things, but on some level I dismiss monetary movements as “rates go up, rates go down … and the markets march on”. It's not wise to ignore a country's economic conditions or present fiscal/monetary policies, but you also cannot lose the forest for the trees. Should investors buy Brazilian financial stocks in the face of higher rates or Turkey financials in the face of market disapproval and uncertainty? Maybe not. By the same token, long-term value investors know that stocks often turn before the news changes and these stocks will probably stabilize and start rebounding ahead of any official “all clear” in interest rates.
More to the point, Turkey and Brazil are two places I really want to be for the long haul.
So, how cute should an investor be? After all, banks like Itau, Garanti, and Yapi are now trading at pretty attractive valuations. Sure, there is the risk that the stocks could go down another 10-20% with investor worries about monetary policies. But tell me when, exactly, there isn't *some* risk that could push down the price of an emerging market stock by a similar amount.
All things considered, I'd probably rather own exporters, but that's not always so easily done. The most liquid stocks (and those most likely to trade as ADRs) are usually domestic-focused companies like banks, utilities, and telecoms. It's a little easier with Brazil, with stocks like Embraer, Brazil Foods (Nasdaq: BRFS), and Vale, but there are fewer options with Turkey beyond ETFs, index funds, mutual funds, and a few stocks like Anadolu Efes.
The bottom line, then, is that I'd be looking to start buying. Maybe world markets are at a near-term top and maybe we're all due for a pullback. That's just part of the risk of investing. Given the turbulence and concerns over monetary policy, though, I'd probably take a multi-stage approach – looking to buy maybe one-third of my position in the next few weeks, another third a few weeks later, and the final third in a few months.
What should investors buy? I would take a very serious look at the three banks – Akbank, Garanti, and Yapi (the first two are reasonably liquid ADRs). I would also dig deeper and look into names like Anadolu, Tofas, Koc Holdings and so on. In fact, I hope to be back in a week or so with some additional Turkish names, hopefully with available ADRs. For Brazil, I'm talking my book, but I'd seriously consider Brazil Foods, as well perhaps as Cosan (NYSE: CZZ), Vale, Itau, Petrobras (NYSE: PBR), and Hypermarcas.
Disclosure: I own shares of Turkcell and Brazil Foods
Wednesday, December 8, 2010
Can Boeing Afford More Delays?
Patience in a funny thing. Everybody wants a job to be done right, but they also want it done on a timescale that at least approximates the original estimates. Customers appreciate that Boeing (NYSE:BA) is attempting to do something quite extraordinary with the 787 Dreamliner project, but if the company cannot ever deliver the plane, who cares how amazing it is?
More to the point - is Boeing running the risk of giving unintentional aid and comfort to emerging rivals? Should investors worry that Boeing's scale and technical expertise may all go for naught because the company was too ambitious and customers ultimately settle for lesser planes that rivals can actually deliver?
More Problems ... Again
Boeing has had no shortage of problems with this new 787 plane. Problems with the Rolls Royce engine (one of the two available; the other being offered by General Electric (NYSE:GE)) got a lot of attention, and now Boeing has suspended test flights after an onboard electrical fire. While the company has not formerly altered the expected initiation of deliveries in the middle of the first quarter of 2011, the Dreamliner is already three years behind schedule and more delays seem more likely than not.
Of course, these delays need to be kept in perspective. There has never been a plane quite like the Dreamliner, and the scale of the engineering challenges are enormous. On top of that, these planes may spend well more than 30 years in service and it is clearly important to get everything right ahead of time.
Please click below for the full piece:
http://stocks.investopedia.
More to the point - is Boeing running the risk of giving unintentional aid and comfort to emerging rivals? Should investors worry that Boeing's scale and technical expertise may all go for naught because the company was too ambitious and customers ultimately settle for lesser planes that rivals can actually deliver?
More Problems ... Again
Boeing has had no shortage of problems with this new 787 plane. Problems with the Rolls Royce engine (one of the two available; the other being offered by General Electric (NYSE:GE)) got a lot of attention, and now Boeing has suspended test flights after an onboard electrical fire. While the company has not formerly altered the expected initiation of deliveries in the middle of the first quarter of 2011, the Dreamliner is already three years behind schedule and more delays seem more likely than not.
Of course, these delays need to be kept in perspective. There has never been a plane quite like the Dreamliner, and the scale of the engineering challenges are enormous. On top of that, these planes may spend well more than 30 years in service and it is clearly important to get everything right ahead of time.
Please click below for the full piece:
http://stocks.investopedia.
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