Boeing Co. Crushed it in 2014 -- and Must Keep on Crushing it in 2015 and Beyond

By Markets Fool.com


Boeing's 737, the once and future king of airplane sales. Photo: Boeing.

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Boeing set a record for most planes delivered to its customers in 2013. Then in 2014 -- Boeing beat it.

That's the upshot of Boeing's announcement this week that in 2014, it set new records for both commercial airplanes delivered, and also for new orders of airplanes to be delivered in the future. The company delivered a total of 723 commercial jets to its customers last year, beating 2013's tally. Adding icing to the cake, Boeing says it booked new orders for 1,432 (net of cancellations -- gross orders were even higher), worth $232.7 billion at list prices, breaking the previous record set in 2007.

As of Tuesday, Boeing says it has 5,789 planes in its backlog, awaiting construction and delivery to its customers. It only takes a bit of back-of-the-envelope figuring to estimate that these backlogged orders are probably worth just under $1 trillion in future revenue to Boeing (assuming, of course, that all these planes were sold at list prices ... which they almost certainly were not).

Boeing's got potential
$1 trillion. That's a nice round number, even if it is largely imaginary. Here at The Motley Fool, though, while we're certainly fond of big, round numbers, what we really want to know is how companies succeed in executing their potential, and reward their investors.

In Boeing's case, we want to know how the company plans to get all of these 5,789 ordered-airplanes into the hands of its customers before they lose interest and cancel their orders. Can it succeed in converting its huge pipeline of orders into completed plane deliveries -- and payment for same?

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A nice problem to have
This brings us to the question of just how Boeing is going to get all of these airplanes out of the gate. To get at the answer, what I've done for you in the chart below is show Boeing's current aircraft backlog by plane model, its current and projected rates of production (current and anticipated), and finally, how long the resulting backlogs appear to be.

Plane

Order Backlog

Current Production, in planes per month (ppm)

Ramping to ...

Then ramping to ...

Backlog in Months (approx.)

Boeing 737

4,299

42

47 ppm in 2017

52 ppm in 2018

88.4

747

36

1.5

1.3 in September*

-

26.5

767

47

1

2 ppm in 2016

-

29.5

777

564

8.3

-

-

68

787

843

10

12 ppm in 2016

14 in 2020

65.4

*This is actually a deceleration in production rates -- and it may have implications for the U.S. President.

What this all means to investors
As you can see, Boeing's 737 family of aircraft, and its 777s and 787 Dreamliners, have the longest "tails," and promise to keep revenues flowing to Boeing through the end of the decade -- at least. Granted, the company has a bit of a problem matching production schedules with demand. Boeing must ensure on the one hand that it doesn't keep customers waiting too long for their planes, and at the same time not let potential sales slip through its fingers because of an overabundance of caution. The production rate increases it has planned, however, seem well-designed to do the job. (Albeit, customers probably wouldn't be too upset to see another uptick in 737 throughput).

Boeing's KC-46: Salvation for the 767? Illustration: Boeing.

Boeing's 747's future looks more tenuous -- last year, the company sold only two 747s ... then had even that small gain zeroed out by cancelations. This airframe, therefore, is likely to go away in the not-at-all distant future.

Finally, the 767. Some analysts have argued that the 767's time, too, has passed. The dearth of backlogged orders, and minuscule production rate to match, certainly suggest this is the case. That said, Boeing can count on significant and sustained demand for the airframe from the U.S. military, which chose a 767-derived design to serve as its new KC-46 Pegasus aerial refueling tanker back in 2011, and plans to buy at least 179 of the planes for its own use.

Long story short, and with the notable exception of the 747, it's safe to say Boeing had a good year in 2014 -- and will keep flying along just fine in 2015 and beyond.

The article Boeing Co. Crushed it in 2014 -- and Must Keep on Crushing it in 2015 and Beyond originally appeared on Fool.com.

Rich Smith has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.