Ethiopian Airlines set to buy 20 latest Boeing planes worth $7.4 billion

Police officers help passengers disembark from the hijacked Ethiopian Airlines flight ET 702 at Cointrin Airport in Geneva February 17, 2014.  REUTERS/Denis Balibouse
Police officers help passengers disembark from the hijacked Ethiopian Airlines flight ET 702 at Cointrin Airport in Geneva February 17, 2014.
REUTERS/Denis Balibouse

By Amanda Schiavo

NEW YORK (TheStreet) — Shares of Boeing Co. are higher by 1.90% to $137.19 on Wednesday morning, on speculation that Ethiopian Airlines is looking to place an order for Boeing’s 777X long-range jetliners before the end of the year, the Wall Street Journal reports.

The airline may buy between 15 and 20 of the latest Boeing planes in a deal that could be valued at $7.4 billion at list price.

Ethiopian Airlines CEO Tewolde Gebremariam said in an interview on Wednesday, that the company has also considered purchasing Airbus Groups’ A350-1000 widebody, the Journal added.

The Boeing aircraft was determined to be more suitable for operations at the airline’s higher altitude hub in Addis Ababa.

The new planes are due for delivery in 2020.

Boeing is developing two versions of its new long-haul plane, the Journal noted. One version will seat about 400 passengers and a lower capacity version would hold fewer passengers but would be better suited to the airline’s needs.

Separately, TheStreet Ratings team rates BOEING CO as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

We rate BOEING CO (BA) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company’s strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, good cash flow from operations and solid stock price performance. We feel its strengths outweigh the fact that the company has had sub par growth in net income.

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Highlights from the analysis by TheStreet Ratings Team goes as follows:

BA’s revenue growth has slightly outpaced the industry average of 5.2%. Since the same quarter one year prior, revenues rose by 11.3%. This growth in revenue does not appear to have trickled down to the company’s bottom line, displayed by a decline in earnings per share.
The company’s current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Aerospace & Defense industry and the overall market, BOEING CO’s return on equity significantly exceeds that of both the industry average and the S&P 500.
Net operating cash flow has significantly increased by 82.25% to $3,297.00 million when compared to the same quarter last year. In addition, BOEING CO has also vastly surpassed the industry average cash flow growth rate of 26.85%.
BOEING CO’s earnings per share declined by 29.0% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, BOEING CO increased its bottom line by earning $7.40 versus $5.97 in the prior year. This year, the market expects an improvement in earnings ($8.05 versus $7.40).
Compared to where it was trading a year ago, BA’s share price has not changed very much due to

(a) the relatively weak year-over-year performance of the overall market, (b) the company’s stagnant earnings, and

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(c) other mixed results. The stock’s price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry.

We feel, however, that other strengths this company displays justify these higher price levels.


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