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Expensive But Has the Wind at its Back

Once again, Ian Gendler, Value Line Market Focus, shines the spotlight on The Boeing Company (BA) a leading manufacturer of commercial aircraft, as well as defense- and space-related products. “It has a market capitalization of more than $160 billion, employs 150,000 individuals, and has been a component of the Dow Jones Industrial Average since 1987, says Gendler.

“Boeing shares have performed incredibly well of late. Over the past three months, the stock price has spiked about 30 points, or almost 13%, What's more, the aerospace behemoth has been, easily, the best performer in the Dow so far in 2017, having registered a total return of 75%. For perspective, Apple (AAPL) is in second place, at 53%. Boeing's run can mostly be attributed to the bull market, recent quarterly financial results, as well as an excellent business outlook.

“We remain bullish in regard to the company's near-term prospects. Thanks to Boeing's September-quarter performance, and remarks by leadership, we have increased our earnings forecasts. Lower operating expenses, research & development expenditures, and taxes, along with greater sales/deliveries of higher-margined planes, should lead to greater profitability. Management will likely also remain aggressive in regard to buying back stock, and the lower share count will contribute to the share-earnings advance we envision. On that note, for 2017, we now expect the bottom line to reach $11.45 a share, or 6% higher than the year-earlier tally. Our 2018 earnings call stands at $12.00 a share.

“We think that the stock is expensive. Nonetheless, as we mentioned three months ago, there is a lot of wind at the issue's back, which may push the price higher over the near term, especially if the bull market continues. That said, the equity is trading at a lofty, and likely unsustainable, P/E ratio, so less nimble investors may want to stay on the sidelines.”

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