Boeing Stock Could Gain from a Stronger Effort on Maintenance Business
When investors think of Boeing Co (NYSE:BA), they think of its big jets. Lately, they have thought about the “Boeing 787” and its progress, because it’s the prototype for an entire new generation of airliners. In other words, airliner design and production drive Boeing stock. But there’s more than that. Business remains good and BA stock is trading at a six-month high of $136.00/share.
Maintenance, repair, and operations (MRO) provide an untapped resource for profit that will help boost Boeing stock. That might come as a surprise. Boeing is the “747” and “Air Force One.” It’s the plane that takes you back home after a long business trip. But Boeing is much more; recently, it’s the “C-17” transport or the “F-15.” In the past, it was the “B-17” or the iconic “B-29,” which helped shape its passenger plans of the post-World War II era.
Indeed, Boeing stock also benefits immensely from military contracts. But that role is less prominent than the heydays of the 1950s and 1960s, when running an aircraft company was more exciting and less cumbersome. Before computers and modern safety and efficiency concerns, the likes of Howard Hughes designed airplanes with more nonchalance than latter-day import car tuners. Boeing turned out dozens of designs, some of them still operational, like the “B-52.”
Those days are over.
Boeing Still Rakes in Millions of Dollars Fulfilling the Pentagon’s Needs
Boeing’s profits come from products that aren’t as visible to the naked eye of civilians. Boeing, for example, has recently signed a multi-million-dollar deal to upgrade the U.S. Air Force’s nuclear arsenal. (Source: “The War to Build America’s New Nuclear Missile Is Just Getting Started,” The National Interest, October 11, 2016.)
Boeing has also won a contract to maintain the U.S. arsenal of various missiles: both nuclear and non-nuclear. It recently won an $85.0-million contract to support the “Trident” missile for the U.S. Navy. The company also has a major role to play in reviving and supporting the nuclear arms program. (Source: “US Air Force Set to Replace Intercontinental Nuke Arsenal,” Military.com, September 25, 2016.)
But it’s not just in the doom-and-gloom business of supporting defense equipment that Boeing is seeing growth. Maintenance is a big and profitable business, and Boeing has been getting an increasing share of it in commercial applications. Future earnings reports will no doubt resonate with the acronym MRO as an ever more important driver of BA stock’s performance.
Boeing Gains as It Takes the Lead on 3D Printing
Boeing recently filed a patent to print parts. Boeing shareholders should definitely see this as bullish development, if not even a breakthrough. 3D printing will be essential to furthering the space program, whether in realistic applications on the space station or the more far-fetched propositions of a human mission to Mars.
Back on Earth, 3D printing helps companies save on storage. This is not the most obvious advantage for Boeing, but if airlines can save money and promote their own share value that way, they will. That’s why it’s such a game changing concept, and why BA stock could reach new heights as the technology matures. (Source: “Boeing’s New 3D-Printed Tool For Making Wings Is So Big It Set A World Record,” Digital Trends, August 30, 2016.)
Boeing’s rapidly growing experience with 3D printing could cut customer’s real estate requirements for parts. Airplanes have all kinds of part sizes, from the smallest rivet to whole wing and fuselage sections. 3D printing will also help to reduce development times and costs, cutting the almost-inevitable risk of delays, given the history of recent airliner production from all manufacturers. All of this would save more than trivial sums of money.
3D printing for prototypes is coming, but it will take time to become profitable. Meanwhile, Boeing can adapt it to an immediately profitable use: its patented spare-parts management based on 3D printing. Three-dimensional printing components make Boeing one of the leading proponents of 3D printing in aerospace. This is one of the technologies that will help ramp up profits in the near future.
The technology allows Boeing to overcome the constraints of storage, which requires—in addition to inventory management and warehouses—regular part shipments. All this carries extra costs. The new 3D printing approach allows Boeing to “ship” parts via Internet to any center equipped with a high-speed Internet connection and a 3D printer.
The increasing use of carbon fibers and enhanced plastics (even graphene one day), will make this technology highly popular. Certainly, 3D printing of parts will be more profitable than making airplanes. That should have BA stock shareholders excited and thinking long-term on Boeing stock.