Ratio Analysis Of Boeing

The Boeing Company operates in the industry of aerospace and defense. The largest aerospace company, Boeing is the #2 maker of large commercial jets (behind rival Airbus) and the #2 defense contractor behind Lockheed Martin. The aerospace and defense industry did suffer the effects of a post-9/11 society. Because of the weakened and fearful tourism market, spending on commercial aircraft did decrease. But recently, revenues have improved considerably as travelers are becoming more comfortable with flying again. Defense expenditures are the leading source of revenue for the US industry. Boeing, despite aerospace spending decreasing, has profited from projects such as the missile interception network and revamp of the US armed forces. The main players in the defense industry are Boeing, Northrop Grumman, Lockheed Martin, General Dynamics and Honeywell International. Below is a table illustrating the revenues of the lead companies in the defense industry, according to Reuters :

Name Revenue (M) Revenue Growth Revenue Growth, 3 years

Industry Average $32,313.8 13.4% 12.7%

The Boeing Company $61,530 14.7% 7.0%

Lockheed Martin Corporation $39,620 6.5% 7.6%

Honeywell International Inc. $32,167 13.4% 10.7%

Northrop Grumman Corporation $30,148 0.3% 4.5%

General Dynamics Corporation $24,063 14.7% 13.8%

As stated in the opening Boeing is the largest manufacturer of commercial jetliners and military aircraft. Boeing makes defense systems, missiles, satellites, and other space vehicles. Boeing has customers in over 90 countries around the world and is one of the largest U.S. exporters. Boeing employs about 150,000 and is based in Chicago, IL. It’s business operations are broken down into two units: Boeing Commercial Airplanes and the other is Boeing Integrated Defense Systems.

Boeing Historical Data6

1916

1927

1934

1944

1958

1970

1983

1994

1996

2001

2003

2004

2005 Boeing is created by William E. Boeing in Seattle, Washington

Boeing created an airline, named Boeing Air Transportation

Because of the air mail act, Boeing split into 3 smaller companies, Boeing Airplane Co., United Airlines, and United Aircraft Corporation.

Due to WWII, Boeing steps up it’s production, focusing on the B-17.

Boeing began delivery of it’s 707, it’s first commercial jet airliner.

Boeing faced a crisis in the Apollo program, which was cancelled after they put lots of work into it.

Boeing produced it’s 1,000 737

Boeing introduces it’s 777

Boeing acquired Rockwell’s aerospace and defense units

Boeing moves from Seattle to Chicago

Boeing’s Commercial Airlines sales drop due to the terrorist attacks of September 11th.

Boeing gets investigated for getting confidential secrets and for stealing trade secrets from Lockheed.

Airbus surpasses Boeing as world’s largest commercial jet maker.

Air Force lifts it’s 20 month ban on Boeing prohibiting them to bid on satellite contracts.

Boeing Financial Information7

Year

2004

2005

2006

Revenues (In Billions)

$52.46

$54.85

$61.53

Net Income

(In Billions)

$1.87

$2.57

$2.21

Change In Cash and Cash Equivalents

(In Billions)

<$1.43>

$2.21

$.71

Boeing has seen a lot in it’s over 90 years of business. Boeing has placed itself into lots of different endeavors and has seen differing levels of success in these markets. According to Yahoo finances it’s total assets have been increasing while at the same time their debts have been decreasing. Even though there was a negative in change in cash and cash equivalents in 2004, Boeing did make a large payment towards lowering their debt in 2004.

Ratios are very important in determining if a company is worth investing in. There are many ratios an investor can look at before determining if it is worth investing in a particular company. For instance, an important ratio is the earnings per share (EPS) on common stock. This ratio is computed by taking a company’s net income and dividing it by shares of stock outstanding. Another important ratio is the price earnings (P/E) ratio is an indicator of a company’s future earnings prospects. Also, the dividend yield is a very important measure of profitability to investors. The dividend yield measure shows the rate of return to common stockholders in terms of cash dividends.

The Boeing Company performs very well in terms of ratios. Boeing’s earnings per share on common stock is 2.81. Also, Boeing’s price earnings ratio is 33.31 and their dividend