Shares of The Boeing Company BA appreciated 5.5% to $233.09 on Nov 15, after the company revealed its plan to add three conversion lines for the 737-800BCF freighter aircraft across North America and Europe amid the rising demand for freighters globally.
Boeing also received an order from Icelease for 11 737-800BCF freighters, which marked the company’s first order from one of the new lines. This boosted investor optimism further.
The initiation of three conversion lines reflects Boeing’s ability to respond and capitalize on growing market demand. This, in turn, is likely to boost the company’s top line.
Importance of 737-800BCF Freighter Aircraft
The 737-800BCF Freighter Aircraft is the standard body freighter market leader that offers higher reliability, lower fuel consumption, lesser operating costs per trip and world-class in-service technical support compared to other standard-body freighters. Quite obviously, such features of the aircraft have attracted several customers, thus resulting in more than 200 orders and commitments from 19 customers.
Growth Prospects of Boeing
Over the past few years, the air cargo market has been witnessing robust growth primarily owing to rising e-commerce demand and global merchandise trade. The international travel restrictions imposed due to COVID-19 resulted in more aircraft availability for conversion amid the rising cargo.
Evidently, air freight demand recorded year-over-year growth of 7.7% in August 2021, according to the International Air Transport Association (IATA). Freighters remain the backbone of the world air cargo industry, and Boeing has been focused on capitalizing on the current market trend that presents prospects for freighters. The current deal with Icelease is a testament to this fact.
Looking ahead, Boeing anticipates the need of 1,720 freighter conversions over the next 20 years to meet the rising demand. Out of these conversions, 1,200 will be standard-body conversions with roughly 20% demand coming from European carriers, and 30% from North America and Latin America. By 2039, Boeing anticipates delivering 2,430 freighters, with approximately half to replace retiring airplanes and the remainder to meet projected traffic growth. This clearly highlights Boeing’s strong prospects in the freighter aircraft space over the long haul.
Per Boeing’s biennial World Air Cargo Forecast (WACF), the global air cargo traffic is expected to witness growth of 4% over the next 20 years. Such projections will not only benefit Boeing but other aerospace majors namely Airbus SE EADSY.
Airbus SE’s freighter and cargo jets comprises A330-200F, A321P2F, A330P2F BelugaST and BelugaXL. The newest freighter to the large cargo market is the A350F, which brings latest-generation innovation from the A350 and reduces fuel burn and CO2 emissions. The A330-200F is a new-generation cargo aircraft that meets the needs of the freight business in the mid-size and long-haul segment.
The A330P2F and A321P2F are passenger aircrafts that have been converted to a freighter providing a cost-effective and highly efficient option to customers. Shares of Airbus have returned 21.4% in the last one year.
Shares of Boeing have gained 10.9% in the past year against the industry’s decline of 27.7%.
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Zacks Rank & Stocks to Consider
The company carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same sector are Transdigm Group TDG and Aerojet Rocketdyne Holdings AJRD, both of which carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Transdigm Group has delivered an earnings surprise of 11.37% in the last reported quarter. The company surpassed the Zacks Consensus Estimate for earnings in three of the trailing four quarters and missed once, the average surprise being 15.03%.
The Zacks Consensus Estimate for Transdigm Group has increased 0.7% in the last 60 days to reach $11.59 per share. The stock has gained 13.9% in the last one year.
Aerojet Rocketdyne delivered an earnings surprise of 23.40% in the last reported quarter. It surpassed the Zacks Consensus Estimate for earnings in two of the trailing four quarters and missed twice, the average negative surprise being 2.17%.
The Zacks Consensus Estimate for Aerojet Rocketdyne has increased 3.6% in the last 60 days to $1.99 per share. The stock has appreciated 17.4% in the last one year.
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