Better Buy: Boeing vs. Airbus

NYSE: BA | Boeing Co. News, Ratings, and Charts

BA – The reassessment in increase in defense spending by several countries amid current geopolitical tensions should benefit the aerospace and defense industry. Therefore, Boeing (BA) and Airbus (EADSY) could be worth watching. But the stocks of which of these stocks is a better buy now? Read more to learn our view.

The Boeing Company (BA) in Chicago and Airbus SE (EADSY) are two prominent players in the aerospace and defense industry. BA designs, manufactures, and sells commercial jetliners, military aircraft, satellites, missile defense systems, human space flight, and launch systems and services worldwide. It operates through four segments—Commercial Airplanes (BCA); Defense, Space & Security (BDS); Global Services (BGS); and Boeing Capital (BCC). In comparison, based in the Netherlands, EADSY designs, manufactures, and delivers aerospace products, services, and solutions worldwide. It operates through three segments: Airbus; Airbus Helicopters; and Airbus Defense and Space.

Increasing U.S. military aid for Ukraine bodes well for the aerospace and defense industry. Furthermore, fears of attacks from Russia are causing several countries to reassess their defense budgets, which should result in several new contracts for aerospace and defense companies. Unfortunately, losing orders from Russia, a prime customer in the aerospace and defense industry, has caused some defense companies to suffer a slight decline in sales during the first quarter. However, efforts to increase domestic security have helped defense stocks escape the market sell-off lately.

Investor optimism in this space is evident in the Invesco Aerospace & Defense ETF’s (PPA) 6.3% gains over the past six months versus the SPDR S&P 500 Trust ETF’s (SPY) 8.8% loss. The global aerospace and defense market is expected to grow at a 2.5% CAGR to $49.68 billion by 2026. Therefore, both BA and EADSY should benefit. While BA’s stock has declined 5.5% in price over the past month, EADSY surged 8%. EADSY is a clear winner with 3.4% gains over the past six months versus BA’s 30.6% loss. But which of these stocks is a better pick now? Let’s find out.

Latest Developments

On June 1, 2022, BA and several Canadian industry partners, including CAE, GE Aviation Canada, IMP Aerospace & Defence, KF Aerospace, Honeywell Aerospace Canada, and Raytheon Canada, announced their collaboration to offer BA’s P-8A Poseidon for the Canadian Multi-Mission Aircraft (CMMA) requirement. This should improve Canada’s capability to defend its northern and maritime borders while ensuring interoperability with NORAD and NATO allies. It can also operate on a 50% blend of sustainable aviation fuel and offer advanced anti-submarine warfare, anti-surface warfare, intelligence, surveillance, reconnaissance, and search and rescue capability. This should allow BA to nurture its long-standing relationship with the Royal Canadian Air Force.

On June 1, 2022, EADSY’s Airbus Helicopters segment in Japan and Japan-based airline operator Nakanihon Air (NNK) jointly conducted a 30-minute flight with NNK’s twin-engine, heavy-lift H215 helicopter, achieving the nation’s first sustainable aviation fuel (SAF) helicopter flight. It is fueled with 600 liters of SUSTEO 10, a renewable jet fuel that contains 10% SAF mixed with Jet A-1 and produced by Euglena, Japan’s first biofuel manufacturer. This SAF-powered flight is an important step for the companies’ shared vision of reducing CO2 emissions.

Recent Financial Results

BA’s revenues for its fiscal 2022 first quarter, ended March 31, 2022, decreased 8.1% year-over-year to $13.99 billion. The company’s non-GAAP operating loss came in at $1.17 billion, representing a 311.3% rise from its year-ago period. While its net loss increased 127% year-over-year to $675 million, its non-GAAP loss per share grew 20.6% to $2.75. As of March 31, 2022, the company had $7.41 billion in cash and equivalents.

For its fiscal 2022 first quarter, ended March 31, 2022, EADSY’s net sales grew 14.7% year-over-year to €12 billion ($12.88 billion). The company’s gross profit came in at €2.54 billion ($2.73 billion), representing a 71.7% rise from the prior-year period. Its pre-tax profit was €1.43 billion ($1.53 billion) for the quarter, indicating a 209.3% year-over-year improvement. EADSY’s net profit came in at €1.19 billion ($1.28 billion), up 244.8% from the year-ago period. Its EPS was  €1.55, indicating a 237% year-over-year improvement. As of March 31, 2022, the company had €15.05 billion ($16.14 billion) in cash and cash equivalents.

Past and Expected Financial Performance

Over the past three years, BA’s EBITDA has decreased at an 84.3% CAGR. BA’s revenue is expected to grow 19.8% year-over-year in its fiscal 2022, ending Dec. 31, 2022, and 22.7% in fiscal 2023.

Over the past three years, EADSY’s EBITDA has grown at an 8.4% CAGR. Analysts expect EADSY’s revenue to grow 8.2% year-over-year in its fiscal 2022, ending Dec. 31, 2022, and 17.4% in fiscal 2023.

Valuation

In terms of forward EV/Sales, BA is currently trading at 1.63x, which is 17.3% higher than EADSY’s 1.39x. And in terms of forward EV/EBITDA, EADSY’s 10.21x compares with BA’s 23.50x.

Profitability

BA’s trailing-12-month revenue is higher than EADSY’s. However, EADSY is more profitable, with a 9.4% net income margin versus BA’s negative value.

Furthermore, EADSY’s levered free cash flow, ROA, and ROTC of 4.1%, 3.1%, and 14%, respectively,  compare with BA’s negative values.

POWR Ratings

While EADSY has an overall B grade, which translates to Buy in our proprietary POWR Ratings system, BA has an overall D grade, which equates to Sell. The POWR Ratings are calculated by considering 118 distinct factors, each weighted to an optimal degree.

EADSY has a B grade for Value, which is in sync with its lower-than-industry valuation ratios. EADSY’s 1.39x forward EV/Sales is 12.4% lower than the 1.59x industry average. BA’s C grade for Value reflects its slightly higher-than-industry valuation ratios. BA’s 1.63x forward EV/Sales is 2.7% higher than the 1.59x industry average.

In terms of Quality, EADSY has been graded a B, which is consistent with its higher-than-industry profitability ratios. EADSY’s 13.9% trailing-12-month EBITDA margin is 4.1% higher than the 13.4% industry average. BA’s C grade for Quality reflects its lower-than-industry profit margins. BA’s 0.1% trailing-12-month EBITDA margin is 99.4% lower than the 13.4% industry average.

Of the 77 stocks in the C-rated Air/Defense Services industry, EADSY is ranked #4, while BA is ranked #63.

Beyond what we have stated above, our POWR Ratings system has graded BA and EADSY for Value, Quality, Stability, and Growth. Get all BA ratings here. Also, click here to see the additional POWR Ratings for EADSY.

The Winner

Amid growing threats from Russia, increasing defense budgets of several countries should benefit both BA and EADSY. However, its relatively lower valuation and higher profitability make EADSY a better buy here.

Our research shows that the odds of success increase if one bets on stocks with an Overall POWR Ratings of Buy or Strong Buy. Click here to access the top-rated stocks in the Air/Defense Services industry.

Want More Great Investing Ideas?

3 Stocks to DOUBLE This Year


BA shares were trading at $139.01 per share on Friday afternoon, down $1.49 (-1.06%). Year-to-date, BA has declined -30.95%, versus a -13.09% rise in the benchmark S&P 500 index during the same period.


About the Author: Sweta Vijayan


Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market. More...


More Resources for the Stocks in this Article

TickerPOWR RatingIndustry RankRank in Industry
BAGet RatingGet RatingGet Rating
EADSYGet RatingGet RatingGet Rating

Most Popular Stories on StockNews.com


Does Trump Change Stock Market Outlook?

The rally of the S&P 500 (SPY) after the election gives a sense that investors are happy that Trump was elected. But perhaps there is more to this story than meets the eye. That’s why Steve Reitmeister shares his updated market outlook taking into account the pros and cons of Trumps proposed new policies. This comes with a preview of his top 11 stocks to buy now.

3 Streaming Stocks Benefiting from Cord-Cutting Trends

As streaming continues to dominate the digital entertainment landscape, the global streaming market presents a lucrative investment opportunity. So, it could be ideal to invest in fundamentally solid streaming stocks Netflix (NFLX), Walt Disney (DIS), and Roku (ROKU). Read further...

3 Gold Stocks to Buy as Safe-Haven Demand Grows

Gold is a stable investment now due to its role as a safe-haven asset during economic uncertainty, rising demand, industrial use, and growth, bolstered by central bank purchases and interest rate cuts. Therefore, investors should consider investing in top gold stocks such as Newmont (NEM), Barrick Gold (GOLD), and Agnico Eagle Mines (AEM). Read more...

3 AI Stocks Transforming Industries and Driving Future Growth

With rapid digitalization, rapid adoption, and development, as well as surging demand, the AI market is on the rise. Amid this backdrop, investors could buy fundamentally solid AI stocks NVIDIA Corporation (NVDA), Microsoft (MSFT), and Meta Platforms (META) poised for substantial gains. Continue reading...

Updated Stock Market Expectations

The S&P 500 (SPY) has already reached an impressive goal of hitting 6,000. Yet you can see how much shares are struggling now up against this resistance. Steve Reitmeister shares his views on what comes next for the market and his top 10 stocks to stay on the right side of the action.

Read More Stories

More Boeing Co. (BA) News View All

Event/Date Symbol News Detail Start Price End Price Change POWR Rating
Loading, please wait...
View All BA News