Boeing Hikes 20-Year Jetliner Demand Forecast By 6.7% To $16T

The Boeing Company (NYSE:BA) recently raised its 20-year global forecast for jetliner demand by 6.7% at the ongoing Paris Air show. Impressive traffic numbers and growing need for new jets, as increasing number of planes are set to retire soon, contribute to the overall improvement in airplane fleet internationally.

Also, steady growth in demand for commercial aviation services is instrumental in boosting the global commercial jet market. Cumulatively, these factors have led to a total market opportunity of $16 trillion compared with the last year’s outlook of $15 trillion.

About the 20-Year Forecast

Per Boeing’s latest Commercial Market Outlook (CMO), the world will need 44,040 new planes, worth $6.8 trillion, between 2019 and 2038. This estimate came 3.1% above previous year's projected demand of 42,730 jets, valued at $6.35 trillion, for the 2018-2037 period. Of the total units, 44% of the demand will be for the replacement of old aircraft, while the rest will support future growth.

Meanwhile, the company continues to identify cost-effective single-aisle jets as the major demand driver, accounting for 73.6% of the total projection. This translates into worldwide demand for 32,420 single-aisle jets, worth $3.48 trillion, mirroring a 3.4% increase over last year's projection.

Such increasing demand for jets will boost the aviation services market. Boeing expects commercial aviation services market to grow 4.2% annually, reaching a value of $9.1 trillion over the next 20 years.

Competition in the Single-Aisle Space

The projected improvement in the single-aisle airplane space can be primarily attributed to the global popularity of the low-cost carrier models. With increasing demand for jets in the emerging Asia-Pacific markets, major airlines in this region are compelled to accelerate the replacement of less-efficient airplanes. Notably, these single-aisle jets have long been the main area of competition between Boeing and its arch rival, Airbus Group (PA:AIR).

Outlook for Other Aircraft Categories

Trailing behind single-aisle jetliners are Boeing’s large wide-body, twin-aisle counterparts. The company expects wide-body jets to also witness solid demand — projecting addition of 8,340 new planes during the 2019-2038 period. Although the figure appears unimpressive compared to the earlier one, for single-aisle category, the price of these planes is adequate to compensate for the difference in volume. Boeing estimates that the total value of all wide-body planes (comprising small, medium or large) sold over the period will be more than $2.6 trillion, while regional jets will account for $105 billion in global sales.

As airlines are increasingly shifting to small and medium/large wide-body airplanes like the 797, 787 and 777X aircraft, the primary demand for larger aircraft will be in the cargo market moving ahead. Boeing projects the requirement for 1,040 new wide-body freighters over the next 20-year period compared with the prior projection of 920 jets.

Boeing Versus Airbus

Of late, Boeing has been able to edge over its arch rival and put sustained pressure on Airbus SE by winning major contracts pertaining to commercial airplanes on a global scale. Per a recent report published by CNN, Airbus has edged out Boeing in terms of order wins at the ongoing Paris Air Show. While Airbus has already received orders for 100 new jets, Boeing secured none. It is struggling due to the 737 Max issue.

Price Movement

In a year’s time, shares of Boeing have gained 4.1% compared with the industry’s 3.2% growth.

Zacks Rank & Key Picks

Boeing currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the same industry are Wesco Aircraft Holdings (NYSE:WAIR) , Northrop Grumman Corp. (NYSE:NOC) and Leidos Holdings (NYSE:LDOS) , each of which carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Wesco Aircraft’s long-term growth is estimated to be 12%. The Zacks Consensus Estimate for 2019 earnings has increased 3.7% to 84 cents over the past 60 days.

Northrop Grumman came up with average positive earnings surprise of 18.50% in the last four quarters. The Zacks Consensus Estimate for 2019 earnings has climbed 2.26% to $19.42 over the past 60 days.

Leidos Holdings delivered average positive earnings surprise of 6.81% in the last four quarters. The Zacks Consensus Estimate for 2019 earnings has risen 1.54% to $4.60 over the past 60 days.

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