Boeing Co.

AgendaCompany OverviewManagement Discussion and AnalysisSWOT AnalysisIndustry OverviewPorters Five Force ModelCompetitorsValuationRecommendation

Company OverviewBoeing is the world’s largest aerospace company and

leading manufacturer of commercial airplanes and defense, space and security systems

It supports airlines and U.S. & allied government customers in more than 90 countries

Headquartered out of Chicago Boeing employs more than 160,000 people across the United States and in 70 countries

Products include commercial and military aircraft, satellites, weapons, electronic and defense systems, launch systems, advanced information and communication

Boeing - DivisionsMarket Segment ( 2010) Revenue %

Commercial Aircrafts 50%

Defense, Space & Security(BDS)

Boeing Military Aircraft (BMA) 22.14%

Network and Space Systems (N&SS)

14.7%

Global Services and Support (G&SS)

12.83%

Boeing Capital Corporation (BCC) 0.99%

Commercial Aircraft-ProductsManufactures family of jetliners – Cargo and passenger Narrow body model-737Wide body model-767 and 777Under Development wide body models-747-8 and 787Offers aviation services support, aircraft modifications,

spares, training and technical advice

Boeing – Commercial AircraftsDelivered 462 airplanes in 2010Revenue grew by 11% for the year 2010Boeing 787 has 847 orders from 57 customers in 37

countriesMore efficient production lines

Year Commercial Airplane Deliveries

2006 398

2007 441

2008 375

2009 481

2010 462

BDS - Products Boeing Military Aircraft

Engaged in R&D production and modification of manned and unmanned military weapons

Mobility – AH-64 Apache, F/A-18 E/F Super Hornet Network and Space Systems Segment

Assists customers in transforming their operations through network integrations – International Space System, Satellite System

Global Services and Support Segment Operates, maintains, trains, upgrades and provides logistic support functions

for military platform and operations – KC-767 International Tank 82 % of revenues of BDS department have come from defense

Geographic Sales

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Africa

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Am

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11%5%

12%6% 3% 1% 1% 1%

59%

Key Financials2010 Net Income of $3.3 billion vs. $1.3 billion in 2009Market Capitalization: $58.6bnP/E: 17.53Current Share Price: $79.39Operating Margin: 7.31%Net Profit Margin: 5.14%Dividends Yield: 2.10 %

Recent Financials2010 Financial (US dollars in millions except per share data)

2010 2009 2008 2007 2006

Revenues 64,306 68,281 60,909 66,387 61,530

Net Earnings

3,307 1,312 2,672 4,074 2,215

EPS 4.46 1.87 3.65 5.26 2.84

Operating Margin

7.7% 3.1% 6.5% 8.8% 4.9%

Contractual Backlog

303,955 296,500 323,860 296,964 216,563

Total Backlog

320,826 315,558 351,960 327,137 250,211

Stock Movement

Source :http://finance.yahoo.com/q?s=BA&ql=0

SWOT AnalysisStrengths•Growth through acquisitions•Strong focus on research and development

•Realignment for growth and expansion to new markets

Weakness•Highly leveraged•Declining profits and margins•Sluggish performance of business divisions•Dependence on United States Department of Defense as they account for 82% of BDS revenue in 2010.

Opportunities•Boeing's global outlook for aircraft demand•Surge in the US defense spending

Threats•Increasing prices of titanium and aluminum•Increasing fuel prices•Intense competition•Heavy dependency on US government contracts•Government regulations•Environmental regulations

Management Discussion & Analysis Revenues in 2010 decreased by 6 % compared to 2009

Lower 777 deliveries as production rate changed from 7 to 5 per month No deliveries on 747 program because of transition from 747-400 to 747-8 BDS revenues decreased by $1,718 m due to lower revenues in Network and Space Systems Segment

Operating earnings in 2010 increased by $ 2,875 m compared to 2009 Commercial Airplanes earnings increased by $ 3,589 m primarily due to $ 2,693 m costs related to first

three 787 flight test aircraft included in R & D in 2009 Long term outlook for the industry remains positive due to fundamental drivers of air travel growth such as:

Economy growth Trade Liberalization of air traffic rights between countries

Management Discussion & AnalysisTo increased the manufacturing of existing

commercial airplanes

The company expects the R&D costs to go down in the future

R&D2010($ mn) 2009 ($ mn) 2008 ($ mn)

Commercial Airplanes 2975 5383 2838

72.19% 82.74% 74.96%

BMA 589 582 486

14.29% 8.95% 12.84%

Network & Space Systems

417 397 298

10.12% 6.10% 7.87%

Global Services & Support

130 122 149

3.15% 1.88% 3.94%

Total 4121 6506 3786

Industry Overview Industry – Aerospace and Defense

Revenues accrued by manufacturers from civil and military aerospace and defense procurements

Major products and services: Aircraft Aircraft engines and engine parts Other aircraft parts and auxiliary equipment

In 2014, the market value is expected to be $1,190.5 billion, an increase of 29.3% since 2009

Defense is the largest segment accounting for 71.8 % of the sector’s total value

$ 3.6 trillion market for 30,900 new airplanes over the next 20 years

Industry OverviewGlobal aerospace and defense industry

segmentation:

External Drivers: Federal Funding for Defense Demand from international airlines Industry systems and technology Demand from domestic airlines

Category % Share

Americas 59.1 %

Europe 22.0 %

Asia – Pacific 19.0 %

Total 100 %

Porters Five Force AnalysisSupplier Power (Moderate)

Suppliers are small. However, the high quality inputs provided by suppliers dilute the bargaining power of players

The quality and availability of these inputs is highly important to the quality of the end products in the aerospace and defense industry, increasing the power of the suppliers

Too many suppliersBuyer Power (Moderate)

Large size of competitors due to merger activity Players are limited as Airbus and Boeing have a virtual duopoly Buyers typically government organizations which flex their financial

muscles to dilute the bargaining power of players

Porters Five Force Analysis Threat of New Entrants (Low)

High capital outlay and expertise The arms industry has become highly concentrated, nationally and internationally

Threat of Substitutes (Low) No real threat of substitutes in defense and aircrafts, however air freight section

might be affected with increase in concerns of carbon emissions as companies are seeking eco-friendly reputation

Degree of Rivalry (Strong) Due to duopoly, Airbus and Boeing are the sole rivals and they are quite evenly

matched Competition is intense in terms of winning defense contracts and companies use

innovation and new technology to differentiate their service

Historic GrowthYear $ Billion % Growth2005 658.8

2006 737.7 12 %

2007 830.9 12.6 %

2008 917.3 10.4 %

2009 920.6 0.4 %

CAGR – 2005 - 2009 8.7 %

CAGR – 2009 – 2014 5.3 %

Key PlayersCompanies Market Share

Boeing 7.4 %EADS 6.5 %

Lockheed Martin Corporation 4.9 %BAE Systems Plc 3.8 %

Other 77.4 %

Competitor Analysis (Fiscal year 12/31/2010)

Comparables Boeing Lockheed Martin BAE Systems Plc

Revenue (USD billions) 64 46.10 35.258

Net Income (USD millions)

3.38 2.93 1.758

Operating Margin (%) 7.06 % 8.50 % 7.4 %

Profit Margin (%) 5.27 % 6.34 % 7.0 %

Debt/Capital(%) 81.3 % 57.5 % 36 %

ROE (%) 135.15 % 68.40 % 20.3 %

ROA (%) 5.06 % 6.71 % 4.0 %

PE (%) 17.57 % 9.77 % 270.54 %