Boeing Helps Blue-Chip Index Soar to New Highs -- WSJ

By Amrith Ramkumar Features Dow Jones Newswires

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (August 1, 2017).

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Shares of Boeing Co. rose for a seventh straight trading session Monday, hitting an all-time high and lifting the Dow Industrials to their 30th record close this year.

The shares climbed $1.19, or 0.5%, to $242.46 after executives said the Chicago company expects Indian airlines to order up to 2,100 planes worth about $290 billion over 20 years, according to Reuters.

Boeing has risen 15% in the past seven sessions around the release of its quarterly earnings last Wednesday, accounting for more than half of the Dow's advance in July.

For the year, the stock is up 56%, making it by far the best performer in the Dow and the fifth-best performer in the S&P 500.

Behind the surge are signs of strength both at Boeing and in the global economy that makes up the market for the company's products.

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Investors are showing growing confidence that an increase in global airline passengers means that airlines will follow through on recent jet orders.

Solid results have helped as well.

For the second quarter, Boeing swung to a profit of $1.76 billion, or $2.89 a share, from a year-earlier loss of $234 million, or 37 cents a share, even as revenue declined to $22.74 billion from $24.76 billion. Year-earlier results were hit by charges on commercial and military programs.

Investors focused on the fact that Boeing's cost-cutting efforts helped it generate more than twice as much free cash as analysts were expecting for the latest quarter.

Boeing also raised its financial outlook and the firm has been buying back shares, helping to support its share price. Boeing's market value has climbed by almost 50% in 2017, recently reaching $143 billion.

Yet the intensity of Boeing's rise is raising concerns among some investors over the health of the broader market. Boeing has accounted for more than three-quarters of the Dow's rally over the past seven trading sessions.

While large share-price increases in a concentrated segment of the market are nothing new -- much of 2017 has been spent chronicling the rise of popular technology shares such as Amazon.com Inc. and Apple Inc. -- it has been unusual for a manufacturing company to be the subject of such fervor.

"The narrowness of this market in some ways is certainly something to be wary of," said Nathan Thooft, senior managing director of global asset allocation at Manulife Asset Management.

Meanwhile, some analysts caution that the shares' rapid run up and relatively high valuation could lead to a selloff if the Chicago company doesn't meet production targets.

The shares are trading at about 24 times Wall Street's projected earnings for the next 12 months, according to FactSet, compared with about 18 for the S&P 500 and 17 for the Dow.

But lately that hasn't mattered.

Since the Dow is price-weighted, meaning that companies with higher share prices exert more influence on the index's direction, an even longer Boeing rally could carry the Dow to 22000, from Monday's close of 21891.12.

(END) Dow Jones Newswires

August 01, 2017 02:47 ET (06:47 GMT)