Shares of The Boeing Company BA rallied 5.9% to $199.52 on Dec 21 after the company revealed its recent order win from United Parcel Service, Inc. UPS for 19 767 freighters. These jets are scheduled for delivery over the period of 2023-2025. The multi-year agreement highlights strong demand for Boeing’s freighters in the e-commerce and expresses cargo markets.
The current order from United Parcel Service, which is already operational with 91 767-freighter aircraft, is likely to meet near-term and long-term cargo demand. The 767 freighter’s proven economics, reliability and flexibility must have attracted UPS to add another 19 freighters to its current fleet of freighters.
Notably, United Parcel Service currently operates 236 Boeing freighters, including the 747, 757, 767 and MD-11. Such huge orders for freighters illustrate BA’s outstanding capabilities in manufacturing freighter aircraft.This, in turn, is likely to boost its revenues from the freighters arena.
Importance of the 767 Freighter Aircraft
The 767Freighter Aircraft is one of the most preferred widebody freighter that can carry 52.4 tons of revenue cargo within the intercontinental range. Its features allow it to serve as a flexible platform for the long-haul, regional and feeder markets. Also,this aircraft has attracted several customers like United Parcel to place huge orders for its giant fleet, thus resulting in more than 270 orders since its inception.
Growth Prospects of Boeing
The rising e-commerce trend has been bolstering the growth of the air-cargo market. Consequently, demand for freighters has been rising. Boeing, being a leader in manufacturing freighters, has been witnessing enormous growth prospects for its freighters amid the pandemic,thus boosting its overall performance. The company added three conversion lines for 737-800BCF in November 2021, primarily to meet the accelerated demand.
Moreover, the international travel restrictions imposed due to COVID-19 resulted in more aircraft availability for conversion amid the rising cargo demand .Looking ahead, Boeing anticipates 4% annual average traffic growth along with a proven need for dedicated freighter capacity to lead to more than 60% growth in freighters over the next two decades. Further, BA expects to make 2,430 freighters delivery by 2039.This clearly highlights Boeing’s strong prospects in freighter aircraft space over the long haul.
Opportunities for Peers
Per Boeing’s biennial World Air Cargo Forecast, global air cargo traffic is anticipated to record growth of 4% over the next 20 years. Such projections will benefit not only Boeing but also other aerospace majors, namely Airbus SE EADSY.
Notably, Airbus’ freighter and cargo jets fleet mainly comprise A330-200F, A321P2F, A330P2F BelugaST and BelugaXL. The newest addition is the A350F, equipped with the latest-generation innovation from the A350. The freighter also bears features that reduce fuel burn and CO2 emissions. The A330-200F is a new-generation cargo aircraft that meets the freight business requirements in the mid-size and long-haul segments.
Moreover, theA330P2F and A321P2F are passenger aircraft converted to freighters, providing a cost-effective and highly efficient option to customers. Shares of Airbus have returned 18.1% in the last year.
Price Performance
Shares of Boeing have plunged 9.2% in the past year compared with the industry’s decline of 32.7%.
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Zacks Rank & Stocks to Consider
Boeing currently carries a Zacks Rank #3 (Hold). A better-ranked stock from the same sector is Aerojet Rocketdyne Holdings AJRD, which carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Aerojet develops and produces specialized propulsion systems as well as armament systems. Currently, it manufactures all four types of propulsion systems for space, defense, civil and commercial applications while being a major supplier of propulsion products to top original equipment manufacturers, such as Boeing.
Aerojet delivered an earnings surprise of 23.40% in the last reported quarter. The Zacks Consensus Estimate for AJRD’s 2021 earnings has increased 3.6% in the last 60 days to $1.99 per share. The stock has appreciated 13% in the past three months.
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The Boeing Company (BA): Free Stock Analysis Report
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