Boeing Rides Production Tailwind

06/17/2011 2:56 pm EST


Jim Jubak

Founder and Editor,

Boeing (BA) has moved the yardsticks—both long- and short-term—in the last few days.

First, the company announced that it will increase the production rate for its newest 737 model, to 35 per month in early 2012 and 42 per month by early 2014. Current production is 31.5 planes a month.

Second, Boeing upped its estimates for total aircraft orders—from all manufacturers—over the next 20 years to $4 trillion. Boeing sees the global fleet doubling in size by 2030, on a 5.1% annual growth in global passenger traffic and a declining average age for aircraft.

Higher fuel prices and tighter environmental regulations are pushing airlines to retire their planes at an earlier age. For example, Boeing projects that 94% of the planes operated by European airlines in 2030 will have entered service after 2011.

About 40% of new deliveries over the next twenty years will be replacement aircraft. The biggest growth in new orders will come from low-cost carriers in Southeast and South Asia.

Boeing shares are down about 6.7% from their May 10 high of $79.55. Boeing says that the increase in production won’t change financial results for 2011, but I do think it will give earnings a slight boost beyond that.

The stock has been in my Jubak’s Picks portfolio since September 30, 2010. The original purchase price was $66.15.

As of June 17, I’d put a target price of $84 a share on the stock by September 2011. That’s just $1 a share above my previous target price.

Full disclosure: I don’t own shares of any of the companies mentioned in this column in my personal portfolio. The mutual fund I manage, Jubak Global Equity Fund (JUBAX), may or may not now own positions in any stock mentioned in this column. The fund did own shares of Boeing as of the end of March. For a full list of the stocks in the fund as of the end of March, see the fund’s portfolio here.

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