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Introduction:
Boeing, based in Chicago, is the largest exporter in the US. The firm generates sales in excess of USD 82 billion per year and employs about 174,000 people. In addition to commercial aircrafts and defense systems, the company designs, engineers, and produces a large number of products and applications used by a large part of the US industry and military. Boeing’s product offerings are currently driven more by emerging market regions/countries than by demand in developed countries. Aviation is obviously the main business, with the commercial air travel segment being the leading long-term growth driver. Boeing estimates that worldwide about 14,300 units are close to replacement status and another 20,000 units will be required by emerging market companies in the next 20 years. The total value of this business opportunity accounts for about USD 4.5 trillion.

The development of the 787 product cycle was a major achievement and elevated Boeing well ahead of its direct competitors in continental and inter-continental point-to-point aircraft developments.   

In the defense business, Boeing is #2 in the world, generating some USD 31.8 billion in turnover, or about 40% of its sales in 2011; however due to budget constraints in the western world, defense spending is expected to reduce or at least stay constant until 2018. For instance, the US Department of Defense (DOD) budget constraints are estimated to about USD 18 billion of which are USD 9 billion are allocated to the Navy and another USD 2 billion to the Air Force.  

Strengths and weaknesses analysis / Fundamental analysis 
Strengths:

• Boeing has a production backlog of about 1,000 units, offering an excellent opportunity for growth,
• Boeing is naturally well ring-fenced because of the high development costs in this field. The costs to develop an entirely new airplane are estimated to exceed USD 16 billion,
• The development of the 787 product line will result in significant cash-flow generation as well as the expansion of product related items,
• Instead of developing a new line of products, Boeing has now acquired the capacity to re-engineer existing product lines to modern standards, 
• The U.S. Air Force recently awarded Boeing the refueling tanker project. Initially about 179 units will be replaced.  The first 18 units are scheduled for delivery prior to 2017, and is worth about USD 3.5 billion. Should the U.S. Air Force decide to replace the entire fleet, the contract could be worth close to USD 75 billion.

Weaknesses:

• Boeing is unable to reduce its present unit production cycle (currently about 9 months),
• Boeing’s defense business will reduce naturally because of budget deficits and because Lockheed is ramping up the F-35 production cycle,
• Due to further important R&D demands and delays in the effective delivery of 787s, Boeing does not currently have a share-repurchase program, 
• Air travel is highly cyclical, hence Boeing’s business is subject to economic cycles,
• Even if Boeing is able to ramp-up the production cycle for the 787 series, the operating margins for this production line will remain at zero because of cost overruns in development, review, repair, and other delays.   

Investment opportunity / Portfolio management 
Operational risks: Medium 
Expected growth: Above average
Investment orientation:   Group “Best-in-Class” investment theme: All-Star, American Stars