Boeing Finnancial Analysis 2008

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Krause Fund Research Autumn 2008 Industrials Recommendation: BUY Analysts

Benjamin Pomeroy Alberto Whitlatch [email protected] [email protected] Michael Crowley Lie Wang [email protected] [email protected] In 1916, William E. Boeing founded the Boeing Company (BA). With a strong history, Boeing remains the world’s largest producer of commercial jetliners and military aircraft. Boeing operates three business units: Boeing Commercial Airplanes, Integrated Defense Systems and Boeing Capital Corporation. Boeing Commercial Airplanes account for 75% of commercial airline fleets. Integrated Defense Systems provide services for global military, government and commercial customers. Though no longer in Seattle, Boeing maintains a strong presence in the Pacific Northwest. Now headquartered in Chicago, Boeing employs 160,000 people in 70 countries. Boeing consistently excels in a cyclical industry by delivering innovative reliable products and providing high levels of customer service. Stock Performance Highlights 52 week High $94.60 52 week Low $39.07 Beta Value 1.25 Average Daily Volume 8.79 MM Company Highlights Market Capitalization $31.63BB Shares Outstanding 732.83 MM EPS 2008E $4.13 EPS 2009E $5.35 2009 P/E Ratio 8.1 Dividend Yield 3.6% 2008 Commercial Plane Deliveries 330 2008 Commercial Plane Orders 639 Company Performance Highlights 2007 ROA 6.02% 2007 ROE 49.83% 2007 BCA Sales $33.86 BB 2007 IDS Sales $32.08 BB Financial Ratios Current Ratio 0.829 Debt to Equity 0.873

Boeing (NYSE: BA)

November 13, 2008

Current Price: $43.16 Target Price: $45-$49

(+) Though manufacturing activity remains weak, Boeing’s orders backlog continues to exhibit solid growth. We forecast this growth to continue at steady rates as economic activity increases.

(-) Boeing’s 52 week Mechanist Strike resulted in lost revenues of $100MM a day. While we expect Boeing to recover this deferred revenue, increased collective bargaining places additional pressure on the manufacturer’s margins.

(+) Continued deregulation in Asian markets present

robust growth opportunities. With an estimated value of $1.19 billion, Boeing finds itself strategically positioned to capture this market through superior product quality.

(-) Continued delays in the 787 Dreamliner project

question Boeing’s operational efficiency. With delivery now slated for 2009, the company has material accounts depending on the planes success.

(+) Strong customer service and innovative support

platforms enable Boeing to successfully integrate technology to meet their customers’ needs ensuring its competitive position.

One Year Stock Performance vs. S&P 500 Figure 1

Executive Summary BA’s Backlog Powers Engines


Capital Markets are in a serious correction. Since the burst of the tech bubble in 2000, interest rates hit historic lows of 1% from 2003 to 2004. The low interest rates enabled consumers and businesses to finance projects at a low costs. With worries of excess exposure and market liquidity, interest rates began to increase. This increase caused defaults and excess write offs. Banks tightened lending practices, slowing down economic activity. With the recent failure of capital market institutions, credit standards remain high until signs of financial stability, depressing economic growth. Boeing’s outlook remains stable during the 2008 recession and threats of financial meltdowns. Boeing’s defense contracts provide a stable business to maintain profits during the recession. Additionally, Boeing’s internationally diverse customer base ensures growth given the sluggish American airline industry. Boeing’s relentless focus on delivering superior value through product development creates a competitive advantage in the aerospace industry. Given this, the focus of our economic analysis tailors to systemic risk factors affecting the aerospace industry. Real Gross Domestic Product Given the high volatility in capital markets, gross domestic product, GDP, provides critical insight to the overall direction of the US economy. We expect the annualized contraction of 25 basis points for 2008’s third quarter to be transitory (Figure 2). GDP growth will moderately increase during 2009 at a 1% annualized rate as capital markets correct and begin providing funds to investment markets. Investment and government expenditures are the primary GDP components affecting Boeing. While the low GDP readings lower the demand for business investment, increased government expenditures help to offset this decrease. Low readings place a slight damper on investment demand in the short term, but not enough to reverse any long run economic outlook. Figure 2

Employment Situation In addition to lower GDP growth, the employment situation provides valuable insight to the direction of the economy. High

levels of unemployment negatively affect Boeing. The demand for airplanes is a derived demand from air travel. With higher levels of unemployment, total flight hours will decline as there are fewer people traveling. Figure 3 indicates significant deterioration in the once robust job market. During 2008’s third quarter, 478,000 jobs were lost and 1,179,000 jobs have been lost year to date. Weak credit markets coupled with negative GDP growth indicate slow job growth well into the future. With these grim prospects, Boeing temporarily faces a weaker demand for commercial airplanes. Another leading economic indicator is the national unemployment rate. The most recent reading estimated national unemployment at 6.5%, a 15-year high.1 Over this 15-year period, the participation rate remained constant at 66% indicating the drop in employment results from layoffs. We believe this unemployment rate is only the beginning. Unemployment will rise to 8% as firms continue to restructure by laying off more workers. Reductions in the employment rate reduce aviation hours, decreasing the demand for Boeing’s commercial airplanes. Figure 3

Personal Income With negative economic growth and high unemployment, personal income decreased substantially. From September to October wages and salaries increased by only .1%, a 20-basis point decline from September.2 This increase was offset by rising inflation. With no growth in purchasing, the demand for manufactured goods will continue to remain low. Low incomes affect Boeing’s profitability. There is a strong correlation between income and discretionary air travel, lower incomes dictate fewer air traffic hours. While lower income affects short-term air traffic, we do not expect any changes in long run projections of air traffic hours. Stock Market Prospects The weak economy, deteriorating job market and low income levels substantially lowered the value of US equity markets. The S&P 500 composite index represents the weighted equity value of 500 publically traded stocks. The S&P 500’s Broad range provides a solid metric for the general performance of US equities. Observing the past three years it is obvious markets and businesses have struggled. The index is down 37.6% (approximately 588.84 points) from a 3 year high in May 2007.3

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With the significant loss in market value, capital markets inadequately channel funds to profitable business investments. Lower business investment suggests fewer growth opportunities for industrial manufactures. Boeing must position itself to recover substantial portions of this loss by delivering products that add long-term economic value. Meeting key delivery dates ensures Boeing’s ability to perform despite adverse market conditions. Figure 4

Interest Rates In efforts to stimulate the economy, monetary authorities significantly lowered interest rates. With the 30 year T – Bond at 4.36% YTM coupled with the overall lack of liquidity, interest rates on treasuries are critical.4 Lower interest rates enable Boeing to sell more planes by offering attractive financing. With an A credit rating, Boeing displays a strong balance sheet during questionable economic times. Additionally, the secondary treasury market is an area we feel warrants considerable attention. With the Federal Reserve cutting interest rates to 1%, we expect the Fed to use open market purchases to provide additional liquidity. These purchases lower interest rates and financing costs for companies like Boeing. Liquidity Premiums With the recent failure of financial institutions, additional emphasis is placed on liquidity premiums. One metric warrants particular attention, the TED Spread. This metric shows the spread between the 3-month T-Bill and 3-Month LIBOR. The spread reached an all time high in October of 4.5% and has since declined to 1.97%.5 This drop suggests easing of the liquidity strain. The lower premium placed on liquidity benefits Boeing, enabling it to pursue more aggressive sales financing. We believe the spread will continue to fall as the economy moves out of the recession and the Federal Reserve continues to back major financial institutions. Producer Price Index Inflation remains a vigilant concern during these turbulent economic times. With the Federal Funds Rate currently at 1%, threats of inflation are foreseeable.6 Coupling the low interest rate environment with the weak aggregate output incubate an inflationary environment. Low interest rates increase the money supply in the economy. During periods of prolonged weak aggregate output the increase in the money supply place upward pressure on prices. Figure 5 shows the core Producer Price Index for intermediate goods.

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The rising cost of intermediate goods adversely affects Boeing’s profitability. A continual increase in the materials required to fabricate planes squeezes Boeing’s margins. In September 2008, the cost of intermediate goods increased 12.1% compared to September 2007.7 This increase lowers profitability as inventory costs rise. Concurrently, the PPI for core finished goods only exhibited an increase of 4.1% from September 2007 to September 2008.7 The spread of 8% suggest that manufactures are taking margin cuts, as the price increase is not passed along to the end consumer. Inflation rates will remain high until the credit markets begin to increase lending and aggregate output starts to increase. MAPI Business Outlook Index The prior economic metrics suggest declines in manufacturing. Figure 6 shows third quarter manufacturing activity declined 17 basis points. Figure 6

Three components captured in this index are backlog orders, new orders, and shipments. Each of these metrics are crucial for Boeing because they show how the business performs relative to the economy.

• Orders backlogs fell 10 points from the prior quarter suggesting a weak demand and exposure to the recession.8

• New orders fell from 46 points to 44 points in the third quarter, suggesting lower demand.8

• Shipments fell from 52 to 47 during the third quarter, indicating lower manufacturing revenues.8

The weak macro backlog coupled with declining new orders and shipments affect Boeing; as the economy contracts, so will

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Boeing. Boeing’s robust backlog provides idiosyncratic protection from the lower manufacturing data. Capacity Utilization Additionally, capacity utilization shows signs of slower manufacturing activity. During the third quarter, industrial production, contracted 2.8%.9 We feel these numbers are artificially lower because of exogenous variables. Figure 7 displays historical capacity utilization. Figure 7

Monthly Capacity Utlization RatesJun 08 Jul 08 Aug 08 Sep 08

Capacity Utlization 79.7 79.6 78.7 76.4 Boeing faces systematic risk to manufacturing utilization. Depending on the recession’s severity, capacity utilization could remain low affecting Boeing’s ability to deliver profitable orders. Our estimates indicate capacity utilization will reach 77% during 2009. ISM Index The length of the recession remains a prominent question. Figure 8 displays the ISM Purchasing Managers Index at a historic low of 38.9.10 This index acts as a leading indicator, identifying troughs in economic activity. The components of the index show the credit crisis’s impact on the broader economy. Production fell 6.7 basis points from September to in October. The sharp decline in production verifies the overall weak demand. Additionally, a drop in orders indicates lower future revenues for manufactures. Weak orders data negatively affect Boeing by reducing future deliveries and revenues; however, Boeing’s strong backlog ensures stable revenue growth during the recession. Stable inventories show some demand for manufactured goods, indicating the market is on it way to equilibrium. Given this data, we expect to see curtailment of manufacturing activity through 2009. Figure 8

Productivity and Costs With slower orders and delivery rates, particularly close attention is drawn to manufacturing efficiency. Two important metrics for manufactures are productivity and labor cost. These metrics indicate that manufacturers are operating in a recessionary environment. Figure 9 summarizes the data for 2008. Productivity growth remained strong during the economic downturn indicated by the positive increase in output per hour,

suggesting a smaller yet stabilizing demand. Conversely, the increase in unit labor costs suggest Boeing’s margins may suffer in the current economic environment, as compensation per hour exceeds output per hour. The data regarding unit labor cost is a key systemic risk factor for Boeing. With the resolution of the Mechanist Strike, Boeing agreed to increase wages by 15% over the next four years.11 With the systemic trend of increasing labor costs per unit, this agreement induces more idiosyncratic risk on Boeing’s margins. Figure 9

Productivity and Costs (% Change)Q1 Q2 Q3

Output Per Hour 2.6 3.6 1.1Compensation Per Hour 3.8 3.5 4.7Unit Labor Costs 1.2 -0.1 3.6 Export Prices A major portion of Boeing’s commercial plane revenues come from abroad. We expect these revenues to grow as China and India continue to grow and deregulate the airline industry. Boeing currently has a robust backlog with emerging market counties and we expect this strength to persist well into the future. Figure 10 shows the year over year percentage change in the export price of capital goods. Figure 10

YoY % Change in Export PricesJuly August September2.20% 2.20% 2.00%

While prices decreased from August to September comparatively. The annual increase indicates the growing demand for capital goods from abroad. Boeing stands to profit from this trend as foreign markets act to stabilize demand for industrial goods at a higher price. Economic Analysis Summary Overall, we anticipate economic growth to remain very low through 2009. Beyond 2009, economic growth will average 1% - 3% annually. The weak credit markets vindicate slow economic growth because funds are not readily available. Weak manufacturing data threatens the severity of the recession. Continued decreases in orders suggest that markets still have a long way to go before establishing equilibrium. Our forecasts account for slow economic growth. Boeing is not immune to the weak manufacturing and recessionary environment; but its robust backlog provides substantial shelter. Overall, we hypothesize Boeing is strongly correlated to manufacturing markets and will experience the majority of issues discussed in this analysis.

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Industry Cycle The US aerospace defense industry has already reached maturity. Total industry revenue growth averaged 5.85% over the past four years.12 Internationally, particularly in China and India, there are underdeveloped aviation markets. In these emerging markets, continued economic deregulation stimulates business travel. Airlines in these countries need wide body jetliners to accommodate increased travel, presenting a great opportunity for aeronautical corporations such as Boeing. Globalization continues to transform the aerospace industry. Sustainable sales growth will come predominantly from Asia and the Euro Zone accounting for 37% and 25% of the global market respectively. Figure 11 shows the projected decomposition of global market value from 2008-2027. Boeing needs to successfully introduce its product lines in these emerging markets to compete with low cost generics. The increased exposure to these regions threatens to commoditize the aerospace industry. Market expansion presents opportunities for new corporations to enter the largely established aeronautical industry. With new entrants from abroad, additional pressure will be placed on price. Boeing must bring its superior brand to these markets to insure adequate sales volumes while maintaining reasonable margins. Figure 11

Supply The wide body Commercial Airplane market operates largely as a duopoly between Boeing and Airbus. Airbus’s ability to provide comparable planes at a competitive price threatens Boeing’s profitability. Airbus continues to gain ground on Boeing as it restructures itself and the dollar strengthens against the Euro.13 As air travel increases in emerging markets, governments will encourage the development of wide body aircraft to accommodate the higher demand, creating a more competitive market. Infant commercial plane manufactures threaten Boeing’s profitability. More manufactures increase the supply of commercial aircraft and limit Boeing’s pricing power. Boeing’s other major business unit, Integrated Defense Systems, IDS, operates in a highly competitive environment. This industry operates primarily as service contractors for the Department of Defense to develop and integrate technology into the military. In the interest of national defense, the number of suppliers in the

industry is rather limited. Boeing, Raytheon, Lockheed Martian and Northrop Grumman compete for the majority of defense contracts. Figure 12 shows the revenues and margins for these main players. Figure 12

Sales Operating

Margin Market Share

BA(IDS) 32,080$ 10.7% 25.6%RTN 23,090$ 11.2% 17.8%LMT 42,440$ 11.2% 33.0%NOC 33,690$ 17.9% 18.5%

A large disparity exists between the products and services provided to the Department of Defense (DoD). Boeing mostly provides aircraft, missile defense, satellites, and information systems. Raytheon produces primarily missile defense systems and defense systems for the Army and Navy. Northrop Grumman services primarily the Navy with its shipbuilding techniques and provides information technology services to the Air Force. Boeing’s direct competitor for fighter planes is Lockheed Martin, LMT. LMT is primarily know for its development of the F-117 stealth fighter but produces a number of planes creating formidable competition. Given the technological capabilities of these participants, competition for defense contracts is high. However, given the large sunk costs required to operate in the defense industry we believe market conditions have significant barriers to entry, keeping competition highly concentrated. Demand The economic expansion over the past two decades made the industrialized world highly interdependent. Businesses operate internationally to hedge risk and maximize profits. Efficient and reliable travel ensures corporate sustainability in the international landscape. General aviation hours on fixed wing planes averaged 24, 436 hours over the past seven years.14 We expect aviation hours to rise steadily at an average rate of 7.2% through 2025 indicated in figure 13. Figure 13

The increased flight hours for fixed winged planes drives the demand for these vehicles. Between 2000 and 2007, the number of active fixed wing planes averaged 180,757.14 With the projected increase in air traffic hours we anticipate the growth of fixed wing planes to average 4.8% through 2025. While this growth rate is 2.4 basis points below the average aviation hours

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growth, this spread is reasonable since old planes accommodate portions of demand. The demand for single aisle planes is expected to grow 92% by the year 2027.15 Boeing is strategically positioned to capitalize on this demand through product innovation. The 787 dreamliner and next generation 737 integrate features of long haul wide body planes in the middle and short range markets. Improved fuel efficiency combined with better seating capacity attracts airlines to convert their fleets to these newer jets. In addition to the US market, China and India contribute to the growing demand. Boeing provides guidance that Asia will demand 9,160 or 37% of the market for commercial airplanes by 2027. 15 With 49% of its business centered around Integrated Defense Systems (IDS), Boeing is subject to Geopolitical risk. The current conflicts in Iraq and Afghanistan provide Boeing with lucrative defense contracts. Withdrawing troops from this area adversely affects Boeing’s profitability. Figure 14 shows the annual change in the Department of Defense Budget from 2004 to 2007. Figure 14

The decreased defense budget over the past three years shows a weaker demand. We expect the defense budget to decrease with the administration change and the gradual withdraw of troops from the Middle East. Boeing faces a weaker demand for these products and services compared to 2003 at the height of the Global War on Terror (GWOT). We expect mild demand for these products as the DoD continues to invest to maintain a technological efficient military. While the IDS business serves other major US allies and is diversified by products and services, we believe any cuts in the defense budget lower revenues from material accounts. Therefore, reapportioning of US defense funds substantially decrease the demand for Boeing’s defense systems. Profitability The profitability in the commercial airplane market is largely affected by purchase costs. Boeing Commercial Airplanes (BCA) acts as an assembly shop integrating many pieces to construct a plane. The key purchases for construction are: wiring and electronics, galleys, seating, titanium and composite materials, and jet engines. Most of these inputs are available through a limited number of suppliers, exposing aircraft manufactures to price increases. Large inputs, like jet engines, are provided by sub-entities of GE and Rolls Royce, making price comparison difficult.

Figure 15

Labor costs in the industry are subject to increases. During fall 2008 the Machinist Union, representing 27,000 Boeing employees engaged in two-month strike.11 With the settlement, labor costs are expected to rise by 15% over the four year contract.11 These wage increases threaten the profitability of aerospace manufactures. The low profitability of airlines coupled with the lease financing of Boeing Capital Corporation (BCC) limit the cost Boeing can pass along to the airlines. Strong collective bargaining attempts threaten the profitability of BCA. A final factor in profitability is the ability of airplane manufactures to price their planes. While there is some variation in the materials used to construct airplanes, companies such as Boeing and Airbus can place additional price premiums on safety records. The attention airlines pay to having a fleet comprised of safe name brand planes creates a large barrier to entry in the commercial airplane market. From 1988 to 2007 fatal airline accidents per 100,000 flight hours averaged 0.0224. Figure 16 shows published FAA statistics for all accidents of large commercial flights. Given the low accident rate, consumers trust the planes of Boeing and Airbus, the majority of planes captured in the data. High safety records create significant value for these two commercial airplane manufacturers, limiting the threat of emerging airline manufactures with unproven safety records. Figure 16

Year Accidents

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Miles Flown 2003 54 0.309 0.00742004 30 0.159 0.00382005 40 0.206 0.00492006 33 0.171 0.00412007 26 0.135 0.0032

Boeing has profitable opportunities in the defense industry. While we anticipate overall defense spending to decline, we do not anticipate any new competitors entering this market. Steadily high barriers to entry prohibit the emergence of new competitors. Arms regulation restricts the suppliers of these products and keeps most of the information classified for national security.16 With a limited customer base, prospective

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firms will avoid the market given the high costs required to produce state of the art defense systems. Even with the prospects of lower revenues, Boeing IDS will provide a strong profits and free cash flow to Boeing. Technology Technology plays an integral role in aerospace manufacturing. Product functionality requires state of the art materials that ensure safety, durability and efficiency.16 Additionally, technology plays a key role in product development. By using Computer Aided Design (CAD), engineers gain a better understating of product design and mitigate costs by bringing the product to market faster.16 BCA successfully levers technology. The company’s main investment, 787 Dreamliner project, shows BCA’s rigor to bring innovation to the marketplace by improving operational efficiencies while mitigating environmental impact. Successfully using technology to improve the development and efficiency of Boeing’s commercial aircraft allows the firm to add value to a prestigious product. IDS makes ready use of technology and materials providing state of the art defense and space exploration equipment. Boeing must utilize technology to maintain its competitive position in the commercial airline and defense manufacturing. Industry Analysis Summary While the commercial aerospace industry is concentrated among two corporations, market structure will change as international competition grows. Boeing plans to compete in these markets by delivering high efficiencies through versatile aircraft. Though mature, this industry will continue to grow as new markets develop and aviation hours increase. Given the growth opportunities in this market profitability will likely erode as new suppliers increase competition. However, Boeing’s record for making safe planes and delivering innovative and reliable products enable it to compete on quality rather than price. To ensure its market dominance Boeing will continuously lever technology to improve product quality and customer satisfaction. Similar conditions persist for Boeing’s IDS business. Fierce competition will endures among current players but will not diffuse internationally due to heavy regulation and national security interests. Demand for these products will fall as the GWOT subsides limiting Boeing’s profit growth. Overall, the IDS business remains a material source of income as the military continues to update its technology. Similarly, Boeing’s ability to integrate technology in defense systems ensures its industry leading position and suggests it will continue to win lucrative defense contracts providing Boeing with steady and safe cash flows.

Overview Founded in Seattle Washington in 1916, William E. Boeing established the modern workings of The Boeing Company with his incorporation Pacific Aero Products Company. Today, the company is based in Chicago, Illinois and operates three major business segments: commercial aircraft, integrated defense systems and airplane lease financing. The Boeing Company is the industry leader for the commercial airplane market with a reputation of incredibly reliable products. Boeing’s reputation for reliable products transcends to its Integrated Defense Systems (IDS) business. Boeing’s management philosophy is to deliver superior products that add long run economic value. Boeing does this through new product development and improving efficiencies on current products. Products and Markets The Boeing Company consists of three major business units: Boeing Commercial Airplanes (BCA), Integrated Defense Systems (IDS), and Boeing Capital Corporation (BCC). Each strategic business unit serves unique markets. Figure 17 shows 2007 revenues generated from each segment. Figure 17

BCA fabricates large commercial jetliners for airlines. Models currently in production include: 737, 747, 777 and the 787. Each model targets a specific flight range allowing airlines to maximize seating capacity and fuel efficiencies. For example, the 737, Boeing’s most popular model, serves short to mid range flights and has the reputation of exceptional reliability. This reputation procured orders of 6,000 737’s exceeding the orders of any competitor’s product line since incorporation.17 IDS provides products and services to the United States Defense Department and to similar international counterparts. This business offers a variety of products ranging from fighter jets to command and control systems. The Chinook, Air Force One, and the F-22 Raptor are a few of Boeing’s better known defense products. BCC acts as an industry leading lessor of planes allowing airlines to mitigate fixed costs. Although three separate businesses, Boeing emphasizes applied innovation to improve supply chain efficiencies and maximize customer satisfaction.

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Key Customers Boeing’s orders books are filled by a variety of airlines. As the premier aerospace manufacture, airlines actively purchase Boeing commercial airplanes. BCA’s customer base is internationally diverse mitigating geographic risk. To date Boeing has robust orders from airlines in three continents.18 With a strong portion of domestic orders, Boeing faces considerable risk to airline profitability. Weak airline profits prohibit strong orders growth in a key market segment. The merger of Delta and Northwest Airlines last spring shows the changing landscape of the American aviation industry. As US airlines suffer record losses, they will look to recapitalize their business. One capitalization is to convert their fleets to lower cost planes from rival manufacturers, threatening Boeing’s margins. With a highly concentrated customer base, Boeing must continuously work to affirm that its products satisfy customer’s needs. Figure 18 show BCA’s top customers’ this year. Figure 18

Notable CustomersAirline YTD OrdersLion Air 56Fly Dubai 50American Airlines 36Air China 30Republic of Iraq 30Continential Airlines 25 Strong Customer Focus To mitigate the risk of losing customer accounts, Boeing introduces new products that help airlines increase profit margins. One example of improving air travel efficiency is Boeing’s introduction of the 787 Dreamliner. Constructed from lightweight composite materials, the 787 makes air travel more efficient by creating a plane 40,000 lbs lighter than any Airbus model; increasing fuel efficiency by 20%.19 Additionally, the composite materials allow BCA to increase the volume of the plane, giving airlines more revenue through greater seating and luggage capacity.19 The 787 displays BCA’s commitment for customer satisfaction. BCA establishes strong customer loyalty by creating planes that increase airlines revenue and mitigate variable costs. Continuously providing superior products in the competitive aerospace industry ensures Boeing’s long run profitability. Boeing’s strong customer focus creates a powerful brand name in the aerospace defense market. In 2007, Boeing won 9 out of 11 defense contracts.20 The reputation of high product quality enables Boeing to penetrate new markets. Broader defense systems present highly lucrative contracts, providing stable profits for Boeing IDS.20 Boeing’s technological capabilities make it the only company capable of organically satisfying any customer’s demand. In addition to designing and delivering products that meet customer’s needs, Boeing provides support services to improve the product quality for the customer. The market for engineering services provides robust growth opportunities. In 2007, Boeing won a $19 billion contract to provide training for F-16 fighter pilots.20 These servicing contracts provide excellent

diversification for Boeing’s manufacturing business. Boeing’s ability to align products and services with customer needs ensures it is the first company customers think of when they need new products or services. Orders & Deliveries While Boeing works closely with customers to deliver quality products, it operates on a long business cycle, requiring many days to deliver orders. In manufacturing, backlogged orders represent future deliveries and revenues. Boeing must work quickly to ensure it meets the customer’s needs in a timely fashion. Figure 19 shows Boeing’s orders books from 2005 to 2007. While 2008 orders books have not closed, they are substantially down from 2007. The sharp decline in orders suggests lower airline spending to ensure survival given the weak economy. Furthermore, the sharp decline in 787 orders indicates airlines feel that the 787 will take longer to get to market. Since its introduction in 2004, there have been three cancelled 787 orders.21 The weak orders growth threatens Boeing’s profitability. As fewer orders are booked, future revenues decrease. Concurrently, Boeing’s mechanist strike lowered the number of deliveries in 2008 costing $5.20 billion in revenue. Our estimates show Boeing will take an additional 55 days to deliver a 737, following the strike. The decreased orders and lower efficiency rate drop Boeing’s projected revenues. Lower orders mean fewer works in process and thus fewer sales. We expect Boeing’s delivery rate to increase as factories reopen following the Mechanist Strike. However, we feel Boeing faces weak orders books with a struggling economy and continued delays on key projects. Figure 19

Gross Orders Model 2005 2006 2007 2008737 574 733 850 481747 48 72 25 3767 19 8 36 24777 153 77 143 52787 235 160 369 79Total 1029 1050 1423 639 Key Suppliers BCA acts as an assembly shop to provide airlines with planes. In an effort to mitigate in process inventories and improve operating margins, Boeing switched from a traditional assembly line to an integrated supply chain. Disruptions in any component of the supply chain adversely affect Boeing’s profitability. Galley supplier, Sell was unable to deliver 5 of 10 wide body galleys due to unionized labor strikes.22 Disruptions like these threaten Boeing’s reputation of delivering quality products on time and delay revenue recognition. We believe Boeing will rely heavily on strategic partnerships to boost profitability but by doing so, it inherently increases operational risk. Unionized Labor In addition to increases in materials prices, Boeing’s margins are threatened by increases in the cost of labor hours. This September, mechanist walked out of BCA plants demanding better benefits. These strikes occur on roughly a three-year basis


and pose a significant threat to Boeing’s profitability. With workers absent from the plant, Boeing lost $100 million a day or $5.2 billion in deferred revenues. The majority of this revenue will not be recouped until 2011, when the mechanist’s contract expires.23 Strong unionized labor threatens Boeing’s margins by increasing variable costs and delaying revenue collection. We expect Boeing will face additional collective bargaining pushes as unions try to tap into prior record profits. 787 Dreamliner Project In 2004, BCA introduced the 787 Dreamliner project. The 787 is a new jet aimed at improving the travel efficiencies of mid range flights by using fewer inputs and lighter materials. The project suffered delays pushing the initial delivery date back from 2008 to 2009 by company guidance. This project is critical to Boeing’s long run value. The plane aims to capture the growing market of fuel-efficient single aisle aircraft estimated at $610 billion over the next twenty years.24 Additionally, the plane emphasizes Boeing’s strong customer focus by enabling airlines to improve cash seat per mile by 10%.25 The project also represents Boeing’s movement to create environmentally friendly aviation. Consisting of primarily composite materials Boeing aims at creating a plane 40,000 lbs lighter than the competition and improve fuel efficiencies by 20%. With new electrical architecture, the 787 requires 35% less power from engines and reduces carbon emissions by 20%. Similarly, the plane requires fewer raw materials and eliminates up to 60 miles of copper wiring.25 These improvements show Boeing’s green concise and make it the industry leader in environmentally friendly aviation. When the 787 takes flight it will create significant value for Boeing. Figure 20 shows the airlines with the most 787 orders. Figure 20

Key 787 CustomersAirline OrdersQuantas 65Nippon Airways 50Air Canada 37Continential Airlines 25British Airways 24 Management Under the leadership of Jim McNerney, Boeing houses a superb management team. Mr. McNerney assumed the role as Chairman and Chief Executive Officer in 2005. Prior to his position at Boeing, Mr. McNerney served in a similar capacity at 3M Corporation from 2000-2005 and was president and CEO of GE aviation from 1997-2000.26 At GE Mr. McNerney learned valuable leadership and management lessons from GE Chairman and CEO, John Francis Welch. Mr. Welch taught Mr. McNerney how to improve shareholder value by bringing innovation to the market. Mr. Mr. McNerney applies Mr. Welch’s lessons at Boeing, by introducing innovation through new products and improved efficiencies. With only three years at Boeing, Mr. McNerney’s management expertise has yet to be realized. We expect Mr. McNerney to continue modernizing Boeing by improving operational performance. His expertise ensures Boeing maintains its competitive position in the dynamic aerospace market.

Target Price The Discounted Cash Flow Model (DCF) results in a valuation of $47.83, the same value obtained from the Economic Profit Model (EP). This price is 10.8% above the current market price. Both models assume continuing growth rates of 3.5% reflecting slower GDP growth and inflation. The model also incorporates a continuing values return on invested capital (ROIC) of 14.79%, derived from our NOPLAT and Invested Capital estimations. The Dividend Discount Model (DDM) estimated an intrinsic value of $49.93 slightly higher than our other estimate. Continuing value Return on Equity was 17%, substantially lower than Boeing’s current ROE of 49%. Variance between the models results from increases in Retained Earnings, due to a more conservative payout policy. Additionally, the computational focus on Assets and Liabilities in the DCF model compared to the DDM’s focus on dividends and earnings explain the irreconcilability of these valuations. Figure 21 Valuation Average High LowDCF 47.83$ - - EP 47.83$ - - DDM 49.35$ - - Defense Contractors 44.82$ 51.05$ 38.96$ Relative Industrials 47.76$ 56.85$ 39.17$ Additional Relative Price to Earnings (P/E) and PEG valuations produce similar results to the DCF and EP Models. Boeing trades at a price of $44.82 compared to other major aerospace defense manufactures and a price of $47.76 compared to other major industrial companies. We chose to compare Boeing to both the aerospace defense firms and industrial manufactures to account for Boeing’s diverse operations. The valuations are based on 2008 and 2009 forward looking P/E and PEG ratios. Price estimates range from $38.96 for the 2008 defense contractor P/E, to a high of $56.85 using the PEG for relative industrials. Relative to peers, above average earnings and growth estimates explain the high variance. Our analysis leads us to believe Boeing is undervalued compared to its competitors in aerospace defense systems and other industrial manufactures. Companies used as relative aerospace defense peers include: Raytheon (RTN), General Dynamics (GD), Lockheed Martin (LMT), Northrop Grumman (NOC), and Honneywell (HON). The relative industrial peers consist of: General Electric (GE), Caterpillar (CAT), Deere and Company (DE), Emerson Electric (EMR), Illinois Tools Works (ITW), and 3M Co (MMM). Overall, our model valuations trade above Boeing’s current price of $43.16. Our expected price range of $45-$49 results from our DCF/EP models. We believe this model does the best job of articulating all economic and accounting data through its use of balance sheet, income statement and exogenous growth forecasts. We maintain our BUY recommendation on the fact that Boeing traded moved off its 52-week low of $39 today

Valuation Analysis


presenting a great opportunity to capture profits in a growing industry. Weighted Average Cost of Capital We made critical assumptions in regards to Boeing’s cost of equity and cost of debt to derive the weighted average cost of capital (WACC). We implemented the Capital Asset Pricing Model (CAPM) to estimate the cost of equity. The following assumptions were used in the CAPM: • The 30-year T-bond proxies as the risk free rate at 4.36%

reflecting a strong focus on quality returns • We calculated the Market Risk Premium of 4.82% by taking

geometric average between S&P 500 returns and T-Bond returns from 1928-2007.

• Beta of 1.25 represents the average of regression coefficients on weekly and monthly one, three and five year returns of Boeing and the S&P 500.

Giving Boeing’s strong Balance Sheet, we do not anticipate any plans to alter capital structure. We estimated cost of debt at 6.51% by backing into the amount from other analysts’ calculations. We then applied this cost to operating leases accounting for off balance sheet financing. From here, we took a weighted average of the required returns relative to the market weights to arrive at a WACC of 9.02%. Revenues and Expenses Based on the Mechanist Strike and weak manufacturing data, we see revenues declining to $54.59 billion during the 2008. Our revenue forecasts derive from estimations on plane and defense contract deliveries. Due to increased backlogs, delays in the supply chain and growing competition we feel Boeing’s deliveries will grow at moderate rates averaging 2% annually. The strong revenue growth of 2010 and beyond comes from the deliveries of the 787. These estimated delivery rates are in line with the FAA’s projection for aviation hours fulfilling market equilibrium. We anticipate IDS deliveries to continue to grow but at diminishing rates as the Global War on Terror concludes. Figure 22 shows the projected revenue for Boeing’s BCA and IDS divisions. We feel Boeing will be able to maintain this unit revenue based on its strong commitment to increasing customer value. Figure 22

Even with the increased labor costs from the Mechanist Strike, Boeing’s cost of products will drop. With the 787 requiring fewer inputs than previous models, Boeing can offset increases

in direct labor hours by reducing the costs of raw materials. Furthermore, the decline in 2008 revenue projections contributes to the decrease in cost of products. Over the forecast, we anticipate costs to moderately rise as the cost of direct labor hours increase but Boeing can offset them through increased bargaining power. We project Boeing can maintain its minimum efficient scale as volume increases, indicated by Figure 23. Figure 23

Customer Financing & Net PP&E Our forecasts call for increases in Customer Financing and Net PP&E. Customer Financing is strongly correlated to plane sales. We forecasted Customer Financing as a percentage of sales. Based on company guidance we expect this metric to increase throughout the forecast, as Boeing uses financing to attract customers. Net PP&E was forecasted as a percentage of sales. We expect Net PP&E to increase as Boeing further utilizes technology to improve production. We feel Boeing needs to keep its facilities modern and these increases represent capitalized expenditures. While it appears that all our assets increase over time, Net Customer Financing and Net PP&E are the only material operating assets that increase relative to sales volume. Accounts Payable & Product Warranties Accounts Payable is projected as a historical percentage of cost of products. Accounts payable should increase to represent better operating performance. However, we expect Boeing will modestly sacrifice AP turns to maintain an efficient supply chain. Furthermore, Boeing’s new defense systems and airplanes require state of the art materials from different suppliers. To establish reliable distribution, Boeing will pay down these accounts faster. As a manufacturer, Boeing places additional emphasis on product quality. To ensure product quality, it offers warranties. We found it necessary to include these warranties in our free cash flow estimates as they represent a claim on Boeing’s resources. Time series analysis for this off balance sheet account was limited leading us to extrapolate 2007 warranties through the forecasted period. This estimate implies that new warranties replace expired warranties at the same rate.

$0$10,000$20,000$30,000$40,000$50,000

BCA & IDS Projected Revenue

BCA

IDS

0%

20%

40%

60%

80%

Costs as % of Sales

Cost of Products

Cost of Services


While valuing Boeing, we made a number of critical assumptions. While these assumptions strongly influence Boeing’s intrinsic value, we feel they are logical, but find it necessary to examine their influence on our model. We examined both exogenous and endogenous variables to test the strength of our valuations. Exogenous Factors Plane Growth The growth rate of commercial plane deliveries is a key assumption for forecasted revenues. These estimates are based off Boeing’s orders backlog and projected aviation demand. To test this assumption, we ran best and worst case scenario analysis. The worst-case analysis decreased all growth estimates by one-half, except current year growth accounting for planes already delivered. The best-case scenario doubled all growth rates. These deviations in the growth rates show large deviations in the number of deliveries. Furthermore, we feel all scenarios closely reflect possible delivery schedules for 2008, with deliveries to date at 330. Figure 24 shows the resulting valuation and delivery differences. Figure 24

Worst Base Best Case Case Case

Estimated Stock Price $44.12 $47.83 $58.622008 Deliveries 332 343 386CV Deliveries 477 564 816 We feel this test accurately captures changes in aircraft demand, Boeing’s orders backlog and Boeing’s internal abilities to increase order turnover. As seen in figure 24 even with these volatile changes in growth expectations, our estimates of Boeing’s intrinsic value still exceed the current market value, affirming our BUY rating. Beta and Market Risk Premium To calculate the cost of capital we assumed two exogenous variables were static. The first variable Beta, proxies as a risk factor in the WACC. Changes in this variable alter price estimates for Boeing. Although we are confident with our Beta estimate of 1.25, price estimates depend on this number. Figure 25 shows that a .05 increase in beta reduces the price by 4.7%, where a decrease in beta by .05 increases price by 4.8%. Figure 25

Beta Sensitivity Analysis Beta 1.15 1.2 1.25 1.3 1.35Price $52.65 $50.15 $47.83 $45.66 $43.63

In addition to Beta, the Market Risk Premium (MRP) was another exogenous variable assumed in the model. We calculated the MRP on historical geometric averages and assumed it remained static over time. While we are confident with our current MRP estimate of 4.82%, this number will change over time. Figure 26 shows that a 10% decrease in the

MRP increase price by 2.4%, while an increase in the MRP decreases price by 2.4%. Figure 26

MRP Sensitivity AnalysisMRP 4.62% 4.72% 4.82% 4.92% 5.02%Price $50.24 $49.02 $47.83 $46.69 $45.58 We expected these variables to affect the pricing abilities of our model, as they determine the discounting rate. However, we anticipated these variables to influence price estimates with similar magnitudes. After further examination, we attribute the differences to Beta’s multiplier effect on the CAPM. Risk-free Rate One crucial assumption to our WACC calculation was our choice of the risk free rate. We elected to use the 30-year T-bond to proxy as a risk free asset. We felt that increased demand for the 10-year treasuries artificially lowered its YTM and felt the 30 year offered the best alternative risk free asset. Daily changes in this 30-year’s YTM greatly influence our cost of capital estimations and intrinsic value. Figure 27 displays that a .1% deviation in the risk-free rate alters estimated intrinsic value by 2%, favorably and unfavorably. Figure 27

Risk Free Rate Sensitivity AnalysisYTM 4.16% 4.26% 4.36% 4.46% 4.56%Price $49.75 $48.78 $47.84 $46.92 $46.03 CV Growth One of the most difficult assumptions to make was Boeing’s continuing value growth rate. Although we see Boeing’s operations steadily growing, non quantifiable exogenous factors influence how fast the company grows. We felt that a reasonable growth estimate is 3.50 but found through our analysis that changes in the growth rate greatly influence Boeing’s value. Figure 28 suggests that minor changes in the growth rate have a marginal impact on Boeing’s intrinsic value. However, large changes in the growth rate greatly influence the model’s predictive capabilities. Figure 28

CV Growth Sensitivity AnalysisCV Growth 3.40% 3.45% 3.50% 3.55% 3.60%Price $47.38 $47.61 $47.83 $48.06 $48.30 Endogenous Factors Revenue Per Delivery One critical assumption in our model is the revenue generated per delivery. We estimated these numbers from historical averages. Changes in unit revenues reflect Boeing’s ability to maintain margins through higher price premiums. Figure 29 shows that a decrease in unit revenue of $10 million lowers the intrinsic value by 11.5%. While an increase in unit, revenue of $10 million raises intrinsic value by 10.3%. This test captures pricing variations in the competitive aerospace markets. Lower estimates display a more competitive market limiting pricing power. Scenarios with higher estimates reflect Boeing’s ability to increase its pricing power.

Sensitivity Analysis


Figure 29 Unit Revenue Sensitivity Analysis

Revenue Per Plane 54 64 74 84 94Price $37.89 $42.86 $47.83 $52.80 $57.77 In addition to testing the commercial airplane unit revenue, we also tested unit revenues per defense contract. Changes in these figures affect the intrinsic value less. For instance, a decrease in IDS unit revenue of $10 million lowers the intrinsic value 2.2% where an increase only raises intrinsic value 2.2%. This analysis affirms our assumptions that Boeing’s value comes from its commercial airplane business and not defense contracting. Figure 30 displays price variations by varying unit revenues. Figure 30

Unit Revenue Sensitivity AnalysisRevenue Per Contract 105 115 125 135 145Price $45.68 $46.76 $47.83 $48.91 $49.98 Continuing Value Cost of Products One other variable that influences Boeing’s margins is the Cost of Products. We were especially interested in these inputs given recent increases in direct labor hours and the decreases in raw materials required for fabrication. Given Boeing’s increase in labor cost from the Mechanist and Engineer contracts modest increases in these percentages could occur. Figure 31 shows how changes in cost of products expressed as a percentage of sales affect Boeing’s intrinsic value. A 1% increase in this ratio decreases the intrinsic value by 17% while a 1% decrease increases value by 15%. We are confident that our estimate of 63.82% reflects Boeing’s ability to manage costs and maintain economies of scale. Figure 31

CV Cost of Products Sensitivity AnalysisCV Cost of Products 61.82% 62.82% 63.82% 64.82% 65.82%Price $62.08 $54.95 $47.81 $40.67 $33.53 CV ROIC The CV ROIC aggregates endogenous variables and therefore is a good metric to examine the affects of all estimations. We are confident that our CV ROIC of 14.79% accurately reflects the returns from Boeing’s operations. Figure 32 show that marginal increase and decreases of .1% only affect price by .7% in both directions. Moving beyond this quartile results in similar changes but at higher magnitudes, a .2% increase or decrease in CV ROIC moves the intrinsic value by 1.5% favorably and unfavorably. Given the symmetry of these changes and marginal impact on intrinsic value, we feel that our estimates for endogenous variables appropriately represent Boeing’s intrinsic value. Figure 32

CV ROIC Sensitivity Analysis CV ROIC 14.59% 14.69% 14.79% 14.89% 14.99%Price $47.09 $47.46 $47.83 $48.20 $48.57

Based on our analysis, we believe that Boeing’s (BA) current stock price of $43.16 is undervalued. With Boeing’s strong historical performance and stable growth forecasts, we feel that Boeing’s intrinsic value falls between $45 and $49. Boeing’s diverse business segments, strong product lines, customer focus and product innovation create significant upside potential. A large portion of this value depends on the success of the 787, which delays continue to reduce Boeing’s stock price. Once this product gets to market, these discounts will dissipate reflecting Boeing’s ability to improve aviation. After a rigorous analysis of the economy, the aerospace industry and Boeing itself, we can confidently say that Boeing warrents a BUY rating.

Investment Summary


1. Dismal Scientist Employment Situation http://www.economy.com/dismal/pro/release.asp

2. Dismal Scientist Personal Income http://www.economy.com/dismal/pro/release.asp?r=usa_income

3. Yahoo Finance S&P 500 Index http://finance.yahoo.com

4. Yahoo Finance http://finance.yahoo.com/bonds

5. Bloomberg Finance TED Spread http://www.bloomberg.com/apps/quote?ticker=.tedsp%3Aind

6. Federal Reserve Board http://www.federalreserve.gov/fomc/fundsrate.htm

7. Dismal Scientist Producer Price Index http://www.economy.com/dismal/pro/release.asp?r=usa_industrial

8. Dismal Scientist Manufactures Alliance MAPI Survey http://www.economy.com/dismal/pro/release.asp?r=usa_mapi

9. Dismal Scientist Industrial Production Index http://www.economy.com/dismal/pro/release.asp?r=usa_industrial

10. Dismal Scientist ISM Index http://www.economy.com/dismal/pro/release.asp?r=usa_napm

11. Boeing and Machinists Agree – now to round 2 http://www.marketwatch.com

12. IBIS World Aircraft Transportation Industry Report http://www.ibisworld.com/industry/keystatistics.aspx?indid=951

13. Boeing Annual Report

14. FAA Aero Space Forecasts General Aviation http://www.faa.gov/data_statistics/aviation/aerospace_forecasts/2008-2025/

15. Current Market Outlook http://www.boeing.com/commercial/cmo/index.html

16. IBIS World Aircraft engine and parts manufacturing in the US industry report (Industry Conditions) http://www.ibisworld.com/industry/conditions.aspx?indid=842

17. Boeing 737 Family http://www.boeing.com/commercial/787family/programfacts.html

18. Boeing Orders Report http://active.boeing.com/commercial/orders/index.cfm?content=displaystandardreport.cfm&pageid=m25062&RequestTimeout=100000

19. Boeing 787 Dreamliner http://www.boeing.com/commercial/787family/programfacts.html

20. Boeing Annual Report (Satisfying Customers. P. 13)

21. Boeing Orders Report http://active.boeing.com/commercial/orders/index.cfm?content=displaystandardreport.cfm&pageid=m25063&RequestTimeout=20000

22. Seattle Time Boeing’s Profits Dive http://seattletimes.nwsource.com/html/boeingaerospace/2008300051_boeing23.html

23. Boeing Union reach deal to end 53 day strike http://www.msnbc.msn.com/id/27408804/

24. Balanced Growth http://www.boeing.com/commercial/cmo/growth.html

25. 787 Fact Sheet http://www.boeing.com/commercial/787family/programfacts.html

26. Forbes.com http://people.forbes.com/profile/w-james-mcnerney/78335

Figure 1: Yahoo Finance http://finance.yahoo.com/q/bc?t=1y&s=BA&l=on&

z=m&q=l&c=&c=%5EGSPC Figure 2: Analyst created chart. Source: Dismal Scientist

United States GDP http://www.economy.com/dismal/pro/release.as

p?r=usa_gdp

Source Citations

Figure Citations


Figure 3: Analyst created chart. Source: Dismal Scientist

Employment Situation http://www.economy.com/dismal/pro/releas

e.asp?rk=0DACB97C-6564-4902-9B40-78C674EBE5CA

Figure 4: Analyst created chart. Source: Yahoo Finance S&P

500 Index http://finance.yahoo.com/q/hp?s=%5EGSPC

&a=09&b=31&c=2005&d=10&e=1&f=2008&g=d


Producer Price Index http://www.economy.com/dismal/pro/release.

asp?r=usa_ppi Figure 6: Analyst created chart. Source: Dismal

Scientist Manufactures Alliance MAPI Survey

http://www.economy.com/dismal/pro/release.asp?r=usa_mapi


Industrial Production http://www.economy.com/dismal/pro/releas

e.asp?r=usa_industrial Figure 8: Analyst created chart. Source: Dismal

Scientist ISM Index http://www.economy.com/dismal/pro/relea

se.asp?r=usa_napm Figure 9: Analyst created chart. Source: Dismal

Scientist Productivity and Cost http://www.economy.com/dismal/pro/relea

se.asp?r=usa_productivity Figure 10: Analyst created chart. Source: Dismal Scientist

Import Export Prices http://www.economy.com/dismal/pro/relea

se.asp?r=usa_impex Figure 11: Analyst created chart. Source: Boeing

Current Market outlook http://www.boeing.com/commercial/cmo/

markets.html Figure 12: Analyst created chart. Source: Boeing

Annual Report and yahoo finance http://finance.yahoo.com/q/co?s=RTN Figure 13: Analyst created chart. Source: FAA General

Aviation tables. http://www.faa.gov/data_statistics/aviation/

aerospace_forecasts/2008-2025/

Figure 14: Analyst created chart. Source: Department of Defense Budget

http://www.defenselink.mil/comptroller/defbudget/fy2007/fy2007_greenbook.pdf

Figure 15: Analyst created chart. Source: IBIS World

Industry Conditions http://www.ibisworld.com/industry/condition

s.aspx?indid=951 Figure 16: Analyst created chart. Source: General Aviation

tables www.faa.gov/data_statistics Figure 17: Analyst created chart. Source: Boeing Annual

Report Figure 18: Analyst created chart. Source: http://active.boeing.com/commercial/orders/inde

x.cfm Figure 19: Analyst created chart. Source: http://active.boeing.com/commercial/orders/inde

x.cfm Figure 20: Analyst created chart. Source: http://active.boeing.com/commercial/orders/inde

x.cfm Figure 21: Analyst created chart. Analyst’s estimates. Figure 22: Analyst created chart. Analyst’s estimates. Figure 23: Analyst created chart. Analyst’s estimates. Figure 24: Analyst created chart. Analyst’s estimates. Figure 25: Analyst created chart. Analyst’s estimates. Figure 26: Analyst created chart. Analyst’s estimates. Figure 27: Analyst created chart. Analyst’s estimates. Figure 28: Analyst created chart. Analyst’s estimates. Figure 29: Analyst created chart. Analyst’s estimates. Figure 30: Analyst created chart. Analyst’s estimates. Figure 31: Analyst created chart. Analyst’s estimates. Figure 32: Analyst created chart. Analyst’s estimates.


Important Disclaimer This report was created by students enrolled in the Security Analysis (6F:112) class at the University of Iowa. The report was originally created to offer an internal investment recommendation for the University of Iowa Krause Fund and its advisory board. The report also provides potential employers and other interested parties an example of the students’ skills, knowledge and abilities. Members of the Krause Fund are not registered investment advisors, brokers or officially licensed financial professionals. The investment advice contained in this report does not represent an offer or solicitation to buy or sell any of the securities mentioned. Unless otherwise noted, facts and figures included in this report are from publicly available sources. This report is not a complete compilation of data, and its accuracy is not guaranteed. From time to time, the University of Iowa, its faculty, staff, students, or the Krause Fund may hold a financial interest in the companies mentioned in this report.

The Boeing Co.Key Assumptions of Valuation Model

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 CV

Earnings Accounts

Sales of products (Cyclical) %of Total Sales 82.78% 85.56% 85.93% 85% 85% 85% 85% 85% 85% 85% 85%

Sales Of Services %of Total Sales 17.22% 14.44% 14.07% 15% 15% 15% 15% 15% 15% 15% 15%

Costs

Cost of Products Cost of Products/Sales 69.44% 69.06% 68.35% 67.15% 63.59% 64.02% 64.02% 64.02% 63.92% 63.82% 63.82%

Cost of Services Cost of Services/Sales 14.16% 12.34% 11.65% 12.98% 12.78% 12.44% 12.46% 12.67% 13.09% 13.16% 13.20%

Boeing Capital Interest Cost Interest Cost/Sales 0.65% 0.57% 0.44% 0.56% 0.53% 0.51% 0.53% 0.52% 0.52% 0.52% 0.56%

Income from Operating Investments Income from Op Investments/Sales 0.16% 0.24% 0.28% 0.31% 0.28% 0.29% 0.29% 0.29% 0.29% 0.29% 0.29%

SG&A SG&A/Sales 7.71% 6.78% 5.32% 5.58% 5.89% 5.60% 5.69% 5.73% 5.67% 5.70% 5.70%

R&D R&D/Sales 4.02% 5.29% 5.80% 6.14% 6.84% 7.36% 6.78% 7.00% 7.05% 7.14% 7.26%

Other Income Other income/ Sales 0.55% 0.68% 0.73% 0.83% 0.82% 0.87% 0.79% 0.81% 0.82% 0.78% 0.77%

Interest and Debt Expense Interest Expense/Total Debt -3% -3% -2% -3% -2% -2% -3% -2% -2% -2% -2%

Provision for Income Taxes Tax Expense/Earnings Before Taxes 9.12% 30.93% 33.67% 34.24% 35.89% 37.00% 36.45% 36.72% 36.58% 36.65% 36.62%

Balance Sheet Accounts

Cash Cash/Sales 9.87% 9.94% 10.61% 10.91% 11.26% 10.52% 10.65% 10.79% 10.82% 10.81% 10.72%

Net Accounts Receivable Net A/R/ Sales 9.57% 8.59% 8.65% 8.72% 8.68% 8.64% 8.46% 8.43% 8.39% 8.32% 8.25%

Current Portion of Customer Financing Current Portion/ Net A/R 7.00% 7.00% 5.71% 5.79% 6.56% 6.41% 6.64% 6.93% 7.05% 7.26% 7.47%

inventories and progress billings Inventories/Cogs +Stdev 21% 19% 21% 19% 18% 20% 19% 20% 19% 19% 19%

net customer financing net customer financing/sales 18% 14% 10% 17% 16% 15% 14% 14% 15% 15% 15%

Net PP&E Net P&E / Revenues 15% 12% 12% 15% 16% 16% 18% 20% 21% 22% 25%

Other Assets Other Assets/ Sales 1.80% 4.44% 1.89% 3.14% 3.51% 3.26% 3.38% 3.64% 3.51% 3.41% 3.45%

Accounts Payable AP/GOGS 43% 38% 37% 35.50% 34.13% 33.02% 30.95% 29.51% 28.06% 26.58% 25.06%

Advanced Billings Advanced Billings/ Sales 18.11% 18.61% 20.86% 17.03% 16.49% 16.22% 15.84% 15.29% 14.17% 15.60% 15.36%

Income Taxes Payable Income Tax Payable/ Tax expense -216% -68% -12% -12.00% -12.00% -12.00% -12.00% -12.00% -12.00% -12.00% -12.00%

Short Term Debt and Current portion of Long Term Debt Shrot term debt/ Current Assets 5% 6% 3% 3.77% 3.19% 4.23% 4.00% 3.60% 3.76% 3.76% 3.87%

non current income taxes payable Non Current Income Taxes Payable/EBT 0% 0% 18% 15% 13% 11% 9% 7% 5% 3% 1%

other L-T liabilities Other LT Liabilities/Sales 0% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1%

Long term debt LT debt/ assets 16% 16% 13% 12.69% 12.10% 13.81% 13.40% 12.93% 12.99% 13.05% 13.23%

The Boeing Company Revenue Decomposition $MM

Historical Boeing Earnings 2005 2006 2007 2008E 2009E 2010E 2011E 2012E 2013E 2014E CVCommercial Airplanes 21,365$ 28,465$ 33,386$ 25,054$ 28,812$ 35,660$ 36,286$ 38,492$ 40,096$ 41,267$ 41,751$ Integrated Defense Systems 31,106$ 32,439$ 32,080$ 28,496$ 29,068$ 29,413$ 30,665$ 30,238$ 30,637$ 30,838$ 31,072$ Boeing Capital Corporation 966$ 1,025$ 815$ 752$ 977$ 1,108$ 1,083$ 1,201$ 1,264$ 1,276$ 1,289$ Other 657$ 299$ 280$ 290$ 285$ 287$ 286$ 287$ 286$ 286$ 286$ Accounting differences/eliminations (473)$ (698)$ (174)$ -$ -$ -$ -$ -$ -$ -$ -$ Revenues 53,621$ 61,530$ 66,387$ 54,591$ 59,142$ 66,469$ 68,320$ 70,218$ 72,283$ 73,668$ 74,398$

Boeing Commercial Airplanes

Deliveries717 12 5 0737 212 302 330 264 304 314 321 333 347 355 359747 13 12 16 13 15 15 16 16 17 17 17757 2 0 0767 10 12 12777 40 65 83 66 76 79 81 84 87 89 90787 80 80 87 91 96 98

Total Deliveries 289 396 441 343 395 488 497 520 542 558 564 Revenue Per Delivery 73.93 71.88 75.71 73.00 73.00 73.00 73.00 74.00 74.00 74.00 74.00

Revenue Split Per Backlogged Plane Order (Revenue/Orders)*Model Order

717 887$ 359$ -$ -$ -$ -$ -$ -$ -$ -$ -$ 737 15,673$ 21,708$ 24,983$ 19,272$ 22,163$ 22,938$ 23,397$ 24,666$ 25,653$ 26,294$ 26,557$ 747 961$ 863$ 1,211$ 934$ 1,075$ 1,112$ 1,134$ 1,196$ 1,244$ 1,275$ 1,288$ 757 148$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ 767 739$ 863$ 908$ -$ -$ -$ -$ -$ -$ -$ -$ 777 2,957$ 4,672$ 6,284$ 4,847$ 5,574$ 5,769$ 5,885$ 6,204$ 6,452$ 6,613$ 6,680$ 787 -$ -$ -$ -$ -$ 5,840$ 5,869$ 6,426$ 6,747$ 7,084$ 7,226$

Total Commercial Plane Revenue 21,365$ 28,465$ 33,386$ 25,054$ 28,812$ 35,660$ 36,286$ 38,492$ 40,096$ 41,267$ 41,751$

Boeing Capital % of Commerical Plane Revenue 5% 4% 2% 3% 3% 3% 3% 3% 3% 3% 3%

Integrated Defense SystemsIDS Deliveries

F/A-18 Models 42 42 44 44 45 46 48 48 49 50 50 T-45TS Goshawk 10 13 9 10 10 11 11 11 11 12 12

F-15E Eagle 6 12 12 12 12 13 13 13 13 14 14 C-17 Globemaster 16 16 16 16 16 17 17 18 18 18 18

CH-47 Chinook 2 10 10 10 11 11 11 11 11 11 AH-64 Apache 12 31 17 16 16 17 17 17 18 18 18 C-40A Clipper 2 1 3 2 2 2 2 2 2 2 2

Total Deliveries 88 117 111 110 112 116 119 121 123 124 126

Revenue per Delivery 151.23 120.57 123.29 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00

Revenue Split Per Contract Delivery(Revenue/Orders)*Model Order

F/A-18 Models $6,352 $5,064 $5,425 $5,500 $5,610 $5,778 $5,952 $6,041 $6,162 $6,223 $6,286T-45TS Goshawk $1,512 $1,567 $1,110 $1,275 $1,301 $1,340 $1,380 $1,400 $1,428 $1,443 $1,457

F-15E Eagle $907 $1,447 $1,479 $1,500 $1,530 $1,576 $1,623 $1,648 $1,680 $1,697 $1,714C-17 Globemaster $2,420 $1,929 $1,973 $2,000 $2,040 $2,101 $2,164 $2,197 $2,241 $2,263 $2,286

CH-47 Chinook $0 $241 $1,233 $1,250 $1,275 $1,313 $1,353 $1,373 $1,400 $1,414 $1,429AH-64 Apache $1,815 $3,738 $2,096 $1,969 $2,008 $2,068 $2,130 $2,162 $2,206 $2,228 $2,250C-40A Clipper $302 $121 $370 $250 $255 $263 $271 $275 $280 $283 $286

Total Revenue of Precision Engagement and Mobility System $13,308 $14,107 $13,685 $13,744 $14,019 $14,439 $14,872 $15,095 $15,397 $15,551 $15,707

Network and Space System Delta II CommercialDelta II Government 2 2

Delta IV Government 3Satellites 3 4 4 4 4 4 4 4 4 4 4

Total Deliveries 5 9 4 4 4 4 4 4 4 4 4

Revenue/Delivery 2444 1327 2924 2216 2228 2174 2385 2251 2259 2267 2291

Revenue Split Per Order (Revenue/Orders)*Model Order

Delta II Commercial - - - - - - - - - - - Delta II Government $4,888 $2,654 - - - - - - - - -

Delta IV Government $0 $3,980 - - - - - - - - - Satellites $7,333 $5,307 $11,696 $8,865 $8,911 $8,695 $9,542 $9,003 $9,038 $9,070 $9,163

Total Revenue of Network and Space System $12,221 $11,941 $11,696 $8,865 $8,911 $8,695 $9,542 $9,003 $9,038 $9,070 $9,163

Total Revenue of Support System $5,577 $6,391 $6,699 $5,887 $6,139 $6,279 $6,251 $6,139 $6,202 $6,218 $6,202

Total IDS Revenue $31,106 $32,439 $32,080 $28,496 $29,068 $29,413 $30,665 $30,238 $30,637 $30,838 $31,072

The Boeing Co.Income StatementFiscal Years Ending December 31$MM

2005 2006 2007 2008E 2009E 2010E 2011E 2012E 2013E 2014E CVTotal revenues 54,845 61,530 66,387 54,591 59,142 66,469 68,320 70,218 72,283 73,668 74,398 Sales of products 45,398 52,644 57,049 46,139 50,091 56,616 58,127 59,592 61,408 62,632 63,224 Sales of services 9,447 8,886 9,338 8,452 9,051 9,853 10,193 10,626 10,875 11,035 11,174

Total costs & expenses 46,208 50,437 53,402 44,049 45,481 51,157 52,613 54,212 56,037 57,096 57,714 Cost of products 38,082 42,490 45,375 36,657 37,610 42,551 43,736 44,951 46,200 47,012 47,478 Cost of services 7,767 7,594 7,732 7,088 7,561 8,268 8,515 8,895 9,461 9,698 9,818 Boeing Capital Corporation interest expense 359 353 295 304 311 338 363 366 376 386 418

Gross profit (loss) 8,637 11,093 12,985 10,542 13,661 15,311 15,706 16,006 16,245 16,571 16,684

Income (loss) from operating investments, net 88 146 188 30 103 107 162 199 226 205 217General & administrative expense (4,228) (4,171) (3,531) (3,046) (3,485) (3,720) (3,887) (4,021) (4,099) (4,196) (4,239) Research & development expense (2,205) (3,257) (3,850) (3,351) (4,048) (4,893) (4,633) (4,912) (5,093) (5,261) (5,402) Gain (loss) on dispositions/business shutdown, net 520 (226) 38 Share Based Plans ExpenseGoodwill impairment - - - - - - - - - - - Settlement with U.S. Department of Justice, net of accruals - (571) - - - - - - - - - Impact of September 11, 2001, charges (recoveries) - - - - - - - - - - -

Earnings (loss) from operations 2,812 3,014 5,830 4,175 6,231 6,805 7,348 7,271 7,280 7,320 7,260 Other income, net 301 420 484 455 484 579 538 567 595 576 576 Interest & debt expense (294) (240) (196) (207) (200) (249) (252) (249) (261) (269) (280)

Earnings (loss) before income taxes 2,819 3,194 6,118 4,423 6,514 7,136 7,634 7,590 7,614 7,627 7,556 Income tax (expense) Benefit (257) (988) (2,060) (1,513) (2,228) (2,440) (2,611) (2,596) (2,604) (2,608) (2,584) Net earnings (loss) from continuing operations 2,562 2,206 4,058 2,910 4,286 4,695 5,023 4,994 5,010 5,018 4,972 Income (loss) from discontinued operations, net - - - Net gain (loss) on disposal of discontinued operations, net (7) 9 16 Cumulative effect of accounting change, net of taxes 17 - - - - - - - - - -

Net earnings (loss) 2,572 2,215 4,074 2,910 4,286 4,695 5,023 4,994 5,010 5,018 4,972

Net earnings (loss) per share-basic 3.27 2.89 5.38 4.15 5.36 5.71 6.39 6.39 6.39 6.38 6.54

Shares 787 766 757 702 799 823 786 782 784 787 760

Dividends 861 991 1,129 1,426 1,321 1,500 1,643 1,758 1,748 1,753 1,756

Dividend Per Share 1.05$ 1.25$ 1.45$ 1.88$ 1.88$ 1.88$ 2.00$ 2.24$ 2.24$ 2.24$ 2.23$

The Boeing Co.Common Size Income StatementFiscal Years Ending December 31

2005 2006 2007 2008E 2009E 2010E 2011E 2012E 2013E 2014E CVTotal revenues 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%Sales of products 82.78% 85.56% 85.93% 84.52% 84.70% 85.18% 85.08% 84.87% 84.96% 85.02% 84.98%Sales of services 17.22% 14.44% 14.07% 15.48% 15.30% 14.82% 14.92% 15.13% 15.04% 14.98% 15.02%

Total costs & expenses 84.25% 81.97% 80.44% 80.69% 76.90% 76.96% 77.01% 77.21% 77.53% 77.51% 77.57%Cost of products 69.44% 69.06% 68.35% 67.15% 63.59% 64.02% 64.02% 64.02% 63.92% 63.82% 63.82%Cost of services 14.16% 12.34% 11.65% 12.98% 12.78% 12.44% 12.46% 12.67% 13.09% 13.16% 13.20%Boeing Capital Corporation interest expense 0.65% 0.57% 0.44%

Gross profit (loss) 15.75% 18.03% 19.56% 19.31% 23.10% 23.04% 22.99% 22.79% 22.47% 22.49% 22.43%

Income (loss) from operating investments, net 0.16% 0.24% 0.28% 0.06% 0.17% 0.16% 0.24% 0.28% 0.31% 0.28% 0.29%General & administrative expense -7.71% -6.78% -5.32% -5.58% -5.89% -5.60% -5.69% -5.73% -5.67% -5.70% -5.70%Research & development expense -4.02% -5.29% -5.80% -6.14% -6.84% -7.36% -6.78% -7.00% -7.05% -7.14% -7.26%Gain (loss) on dispositions/business shutdown, net 0.95% -0.37% 0.06% - - - - - - - - Goodwill impairment 0.00% - - - - - - - - - - Settlement with U.S. Department of Justice, net of accruals 0.00% -0.93% - - - - - - - - - Impact of September 11, 2001, charges (recoveries) 0.00% - - - - - - - - - -

Earnings (loss) from operations 5.13% 4.90% 8.78% 7.65% 10.54% 10.24% 10.76% 10.36% 10.07% 9.94% 9.76%Other income, net 0.55% 0.68% 0.73% 0.83% 0.82% 0.87% 0.79% 0.81% 0.82% 0.78% 0.77%Interest & debt expense -0.54% -0.39% -0.30% -0.38% -0.34% -0.37% -0.37% -0.35% -0.36% -0.36% -0.38%

Earnings (loss) before income taxes 5.14% 5.19% 9.22% 8.10% 11.01% 10.74% 11.17% 10.81% 10.53% 10.35% 10.16%Income tax expense (benefit) -0.47% -1.61% -3.10% -2.77% -3.77% -3.67% -3.82% -3.70% -3.60% -3.54% -3.47%Net earnings (loss) from continuing operations 4.67% 3.59% 6.11% 5.33% 7.25% 7.06% 7.35% 7.11% 6.93% 6.81% 6.68%Income (loss) from discontinued operations, net 0.00% - - - - - - - - - - Net gain (loss) on disposal of discontinued operations, net -0.01% 0.01% 0.02% - - - - - - - - Cumulative effect of accounting change, net of taxes 0.03% - - - - - - - - - -

Net earnings (loss) 4.69% 3.60% 6.14% 5.33% 7.25% 7.06% 7.35% 7.11% 6.93% 6.81% 6.68%

The Boeing Co.Balance SheetFiscal Years Ending December 31$MM

2005 2006 2007 2008E 2009E 2010E 2011E 2012E 2013E 2014E CVCash & cash equivalents 5,412 6,118 7,042 5,956 6,657 6,991 7,274 7,575 7,824 7,961 7,973 Short-term investments 554 268 2,266 2,358 2,454 2,554 2,658 2,766 2,879 2,996 3,118 Accounts receivable, net 5,246 5,285 5,740 4,762 5,133 5,743 5,777 5,918 6,061 6,127 6,135 Current portion of customer financing, net 367 370 328 276 337 368 384 410 427 445 458 Income taxes receivable - - - - - - - - - - - Deferred income taxes 2,449 2,837 2,341 2,128 1,935 1,759 1,599 1,454 1,321 1,201 1,092 Inventories, net of advances & progress billings 7,940 8,105 9,563 7,070 6,892 8,392 8,527 8,802 8,909 9,065 9,246 Assets of discontinued operations - - - - - - - - - - - Total current assets 21,968 22,983 27,280 22,550 23,408 25,807 26,219 26,925 27,421 27,795 28,021

Customer financing, net 9,639 8,520 6,777 9,322 9,286 9,892 9,799 10,141 11,051 10,999 10,994 Property, plant & equipment, net 8,420 7,675 8,265 7,978 9,593 10,798 12,571 13,769 15,208 16,446 18,262 Goodwill 1,924 3,047 3,081 3,081 3,081 3,081 3,081 3,081 3,081 3,081 3,081 Prepaid pension expense 13,251 - - - - - - - - - - Other acquired intangibles, net 875 1,698 2,093 2,224 2,556 2,442 2,405 2,391 2,385 2,395 2,397 Deferred income taxes 140 1,051 197 179 163 148 135 122 111 101 92 Investments 2,852 4,085 4,111 4,275 4,446 4,624 4,809 5,002 5,202 5,410 5,626 Pension plan assets, net - - 5,924 5,924 5,924 5,924 5,924 5,924 5,924 5,924 5,924 Other assets 989 2,735 1,258 1,713 2,075 2,168 2,309 2,557 2,536 2,509 2,567 Total assets 60,058 51,794 58,986 57,247 60,532 64,883 67,251 69,912 72,920 74,661 76,964

Accounts payable & other liabilities 16,513 16,201 16,676 13,012 12,837 14,049 13,535 13,265 12,965 12,494 11,900 Advances & billings in excess of related costs 9,930 11,449 13,847 9,297 9,754 10,780 10,823 10,735 10,245 11,494 11,427 Income taxes payable 556 670 253 182 267 293 313 311 312 313 310 Short-term debt & current portion of long-term debt 1,189 1,381 762 849 747 1,093 1,048 968 1,030 1,044 1,084 Total current liabilities 28,188 29,701 31,538 23,339 23,605 26,214 25,719 25,280 24,553 25,345 24,721

Deferred income taxes 2,067 1,190 1,082 983 894 813 739 672 611 555 Accrued retiree health care 5,989 7,671 7,007 7,286 7,400 7,331 7,363 7,344 7,353 7,349 7,351 Accrued pension plan liability 2,948 1,135 1,155 1,238 1,235 1,252 1,241 1,245 1,243 1,244 1,244 Non-current income taxes payable - - 1,121 663 847 785 687 531 381 229 76 Deferred lease income 269 - - - - - - - - - - Other long-term liabilities - 391 516 386 439 481 501 512 528 537 543 Long-term debt 9,538 8,157 7,455 7,265 7,327 8,962 9,011 9,039 9,470 9,741 10,186 Total Liabilities 48,999 47,055 49,982 41,259 41,836 45,920 45,336 44,690 44,200 45,056 44,676

Common Equity 9,432 9,716 9,818 9,818 9,818 9,818 9,818 9,818 9,818 9,818 9,818 Treasury shares, at cost (11,075) (12,459) (14,842) (10,201) (8,955) (11,089) (11,354) (11,217) (10,991) (13,325) (13,952) Retained earnings (accumulated deficit) 17,276 18,453 21,376 22,860 25,825 29,020 32,400 35,636 38,898 42,163 45,378 Accumulated other comprehensive income (loss) (1,778) (8,217) (4,596) (3,690) (5,193) (5,985) (6,148) (6,215) (6,206) (6,250) (6,156) ShareValue trust shares (2,796) (2,754) (2,752) (2,800) (2,800) (2,800) (2,800) (2,800) (2,800) (2,800) (2,800) Total shareholders' equity 11,059 4,739 9,004 15,988 18,696 18,964 21,916 25,222 28,720 29,605 32,288 Total Liabilities and Shareholders' equity 60,058 51,794 58,986 57,247 60,532 64,883 67,251 69,912 72,920 74,661 76,964

The Boeing Co.Common Size Balance SheetFiscal Years Ending December 31

2005 2006 2007 2008E 2009E 2010E 2011E 2012E 2013E 2014E CVCash & cash equivalents 9.87% 9.94% 10.61% 10.91% 11.26% 10.52% 10.65% 10.79% 10.82% 10.81% 10.72%Short-term investments 1.01% 0.44% 3.41% 4.32% 4.15% 3.84% 3.89% 3.94% 3.98% 4.07% 4.19%Accounts receivable, net 9.57% 8.59% 8.65% 8.72% 8.68% 8.64% 8.46% 8.43% 8.39% 8.32% 8.25%Current portion of customer financing, net 0.67% 0.60% 0.49% 0.51% 0.57% 0.55% 0.56% 0.58% 0.59% 0.60% 0.62%Income taxes receivable 0.00% 0.00% - - - - - - - - - Deferred income taxes 4.47% 4.61% 3.53% 3.90% 3.27% 2.65% 2.34% 2.07% 1.83% 1.63% 1.47%Inventories, net of advances & progress billings 14.48% 13.17% 14.40% 12.95% 11.65% 12.63% 12.48% 12.54% 12.33% 12.31% 12.43%Assets of discontinued operations 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%Total current assets 40.05% 37.35% 41.09% 41.31% 39.58% 38.83% 38.38% 38.35% 37.94% 37.73% 37.66%

Customer financing, net 17.57% 13.85% 10.21% 17.08% 15.70% 14.88% 14.34% 14.44% 15.29% 14.93% 14.78%Gross P&EAccumulated DepreciationProperty, plant & equipment, net 15.35% 12.47% 12.45% 14.61% 16.22% 16.24% 18.40% 19.61% 21.04% 22.33% 24.55%Goodwill 3.51% 4.95% 4.64% 5.64% 5.21% 4.64% 4.51% 4.39% 4.26% 4.18% 4.14%Prepaid pension expense 24.16% 0.00% - - - - - - - - - Other acquired intangibles, net 1.60% 2.76% 3.15% 4.07% 4.32% 3.67% 3.52% 3.41% 3.30% 3.25% 3.22%Deferred income taxes 0.26% 1.71% 0.30% 0.33% 0.28% 0.22% 0.20% 0.17% 0.15% 0.14% 0.12%Investments 5.20% 6.64% 6.19% 7.83% 7.52% 6.96% 7.04% 7.12% 7.20% 7.34% 7.56%Pension plan assets, net 0.00% 0.00% 8.92% 10.85% 10.02% 8.91% 8.67% 8.44% 8.20% 8.04% 7.96%Other assets 1.80% 4.44% 1.89% 3.14% 3.51% 3.26% 3.38% 3.64% 3.51% 3.41% 3.45%Total assets 109.50% 84.18% 88.85% 104.87% 102.35% 97.62% 98.44% 99.56% 100.88% 101.35% 103.45%

Accounts payable & other liabilities 30.11% 26.33% 25.12% 23.83% 21.71% 21.14% 19.81% 18.89% 17.94% 16.96% 16.00%Advances & billings in excess of related costs 18.11% 18.61% 20.86% 17.03% 16.49% 16.22% 15.84% 15.29% 14.17% 15.60% 15.36%Income taxes payable 1.01% 1.09% 0.38% 0.33% 0.45% 0.44% 0.46% 0.44% 0.43% 0.42% 0.42%Short-term debt & current portion of long-term debt 2.17% 2.24% 1.15% 1.56% 1.26% 1.64% 1.53% 1.38% 1.43% 1.42% 1.46%Total current liabilities 51.40% 48.27% 47.51% 42.75% 39.91% 39.44% 37.65% 36.00% 33.97% 34.40% 33.23%

Deferred income taxes 3.77% 0.00% 1.79% 1.98% 1.66% 1.35% 1.19% 1.05% 0.93% 0.83% 0.75%Accrued retiree health care 10.92% 12.47% 10.55% 13.35% 12.51% 11.03% 10.78% 10.46% 10.17% 9.98% 9.88%Accrued pension plan liability 5.38% 1.84% 1.74% 2.27% 2.09% 1.88% 1.82% 1.77% 1.72% 1.69% 1.67%Non-current income taxes payable 0.00% 0.00% 1.69% 1.22% 1.43% 1.18% 1.01% 0.76% 0.53% 0.31% 0.10%Deferred lease income 0.49% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%Other long-term liabilities 0.00% 0.64% 0.78% 0.71% 0.74% 0.72% 0.73% 0.73% 0.73% 0.73% 0.73%Long-term debt 17.39% 13.26% 11.23% 13.31% 12.39% 13.48% 13.19% 12.87% 13.10% 13.22% 13.69%

Common shares 17.20% 15.79% 14.79%Treasury shares, at cost -20.19% -20.25% -22.36% -18.69% -15.14% -16.68% -16.62% -15.97% -15.21% -18.09% -18.75%Retained earnings (accumulated deficit) 31.50% 29.99% 32.20% 41.88% 43.67% 43.66% 47.42% 50.75% 53.81% 57.23% 60.99%Accumulated other comprehensive income (loss) -3.24% -13.35% -6.92% -6.76% -8.78% -9.00% -9.00% -8.85% -8.59% -8.48% -8.27%ShareValue trust shares -5.10% -4.48% -4.15% -5.13% -4.73% -4.21% -4.10% -3.99% -3.87% -3.80% -3.76%Total shareholders' equity 20.16% 7.70% 13.56% 29.29% 31.61% 28.53% 32.08% 35.92% 39.73% 40.19% 43.40%Total Liabilities and Shareholders' equity 109.50% 84.18% 88.85% 104.87% 102.35% 97.62% 98.44% 99.56% 100.88% 101.35% 103.45%

The Boeing Co.Cash Flow StatementFiscal Years Ending December 31$MM

2005 2006 2007 2008E 2009E 2010E 2011E 2012E 2013E 2014E CV

Operating ActivitiesNet earnings (loss) 2,572 2,215 4,074 2,910 4,286 4,695 5,023 4,994 5,010 5,018 4,972 Adjustments To Net Income 3,494 3,097 2,835 10,511 (950) 1,780 (335) (893) 483 (129) 362 Changes In Assets and LiabilitiesAccounts receivable (592) (244) (392) 978 (371) (610) (34) (142) (143) (66) (7) Inventories, net of advances, progress billings & reserves (1,965) 444 (1,558) 52 (61) (32) (16) (26) (17) (18) (13) Accounts payable & other liabilities 963 (744) 928 (3,664) (175) 1,212 (514) (270) (300) (471) (594) Advances & billings in excess of related costs 3,562 1,739 2,369 (4,550) 457 1,027 42 (88) (490) 1,249 (67) Income taxes receivable, payable & deferred 628 933 1,290 1455 (654) (577) (410) (222) (255) (234) (233) Deferred Lease IncomeOther long-term liabilities (476) (62) 71 (130) 53 43 19 11 17 9 6 Prepaid Pension Expense (1,862) (522) (580) - - - - - - - - Goodwill - - - - - - - - - - - Other acquired intangibles 11 - - - - - - - - - - Accrued retiree health care 30 114 (664) (279) (114) 69 (32) 19 (9) 4 (2) Customer financing 589 718 1,458 (2,493) (24) (637) 77 (368) (928) 34 (8) Other assets & liabilities 46 (189) (247) (455) (362) (93) (141) (249) 22 27 (58) Net Operating Cash Flow 7,000 7,499 9,584 4,335 2,085 6,875 3,681 2,767 3,391 5,422 4,358

Investing ActivitiesDiscontinued operations customer financing, additionsDiscontinued operations customer financing, reductions 2 - - PP&E (additions) reductions (1,496) (1,456) (1,672) 287 (1,614) (1,205) (1,774) (1,197) (1,440) (1,238) (1,816) Acquisitions, net of cash acquired (172) (1,854) (75) - - - - - - - - Proceeds from dispositions of discontinued operations - - - - - - - - - - - Proceeds from dispositions 1,709 123 - - - - - - - - - Investments (Contributions) Proceeds (141) 35 (1,893) 257 267 278 289 301 313 325 338 Other investing activities - (34) (182) - - - - - - - - Net cash flows from investing activities (98) (3,186) (3,822) 543 (1,347) (927) (1,485) (897) (1,127) (913) (1,477)

Financing ActivitiesNet Borrowings (1,378) (1,680) (1,366) 103 39 (1,981) (5) 52 (493) (284) (485) Stock options exercised 348 294 209 0 0 0 0 0 0 0 0Excess tax benefits from share-based payment arrangements 70 395 144 - - - - - - - - Common shares repurchased (2,877) (1,698) (2,775) (4,641) 1,246 (2,134) (265) 137 226 (2,334) (627) Dividends paid (820) (956) (1,096) (1,426) (1,321) (1,500) (1,643) (1,758) (1,748) (1,753) (1,756) Net cash flows from financing activities (4,657) (3,645) (4,884) (5,964) (36) (5,615) (1,913) (1,569) (2,015) (4,372) (2,869)

Effect of exchange rate changes on cash & cash equivalents (37) 38 46 - - - - - - - -

Net increase (decrease) in cash & cash equivalents 2,208 706 924 (1,086) 702 333 283 301 249 137 12 Cash & cash equivalents at beginning of year 3,204 5,412 6,118 7,042 5,956 6,657 6,991 7,274 7,575 7,824 7,961 Cash & cash equivalents at end of year 5,412 6,118 7,042 5,956 6,657 6,991 7,274 7,575 7,824 7,961 7,973

The Boeing Co.Value Driver EstimationFiscal Years Ending December 31$MM

2005 2006 2007 2008E 2009E 2010E 2011E 2012E 2013E 2014E CVNOPLATEBITA

Gross Profit 8,637 11,093 12,985 10,542 13,661 15,311 15,706 16,006 16,245 16,571 16,684 SG&A (4,228) (4,171) (3,531) (3,046) (3,485) (3,720) (3,887) (4,021) (4,099) (4,196) (4,239) Boeing Capital Corporation Interest Expense (359) (353) (295) (304) (311) (338) (363) (366) (376) (386) (418) Research and Development (2,205) (3,257) (3,850) (3,351) (4,048) (4,893) (4,633) (4,912) (5,093) (5,261) (5,402) Income from Operating Investments 88 146 188 30 103 107 162 199 226 205 217

Total Operating Income (EBITA) 1,933 3,458 5,497 3,870 5,920 6,466 6,986 6,905 6,903 6,933 6,842 Less: Total Adjusted Taxes

Marginal Tax Rate 34.90% 34.70% 34.20% 34.20% 34.20% 34.20% 34.20% 34.20% 34.20% 34.20% 34.20%Total Income Tax Provision 257 988 2,060 1,513 2,228 2,440 2,611 2,596 2,604 2,608 2,584 Plus: Tax Shield From Interest Expense 103 83 67 71 69 85 86 85 89 92 96 Less: Depositions on Business Divestures (181) 78 (13) - - - - - - - - Plus: Tax Shield From Share Plan ExpensePlus: Tax Shield on Goodwill ImpairmentPlus: Tax Shield from State Department Settlement - 198 - - - - - - - - - Less: September 11th Recovery - - - - - - - - - - - Less: Tax on Other Income (105) (146) (166) (156) (165) (198) (184) (194) (204) (197) (197)

Less: Adjusted Taxes 73 1,202 1,949 1,428 2,131 2,327 2,513 2,487 2,490 2,503 2,483 Deferred Taxes

Deferred Tax Liability 2,067 - 1,190 1,082 983 894 813 739 672 611 555 Deferred Tax Asset 2,589 3,888 2,538 2,307 2,098 1,907 1,733 1,576 1,433 1,302 1,184 Plus: Change in Deferred Taxes 533 (3,366) 2,540 123 111 101 92 84 76 69 63

NOPLAT 2,393 (1,110) 6,088 2,565 3,901 4,240 4,565 4,502 4,490 4,499 4,422

Invested Capital Operating Current Assets

Cash & Equivalents 5,412 6,118 7,042 5,956 6,657 6,991 7,274 7,575 7,824 7,961 7,973 Excess Cash 476 580 1,067 1,043 1,335 1,008 1,125 1,255 1,318 1,331 1,277 Plus: Normal Cash (9% of Sales) 4,936 5,538 5,975 4,913 5,323 5,982 6,149 6,320 6,505 6,630 6,696 Plus: Receivables 5,246 5,285 5,740 4,762 5,133 5,743 5,777 5,918 6,061 6,127 6,135 Plus: Current Portion of Customer Financing 367 370 328 276 337 368 384 410 427 445 458 Plus: Inventory& Progress Billings 7,940 8,105 9,563 7,070 6,892 8,392 8,527 8,802 8,909 9,065 9,246 Plus: Income Taxes Receivable - - - - - - - - - - -

Total Operating Current Assets 18,489 19,298 21,606 17,021 17,685 20,486 20,837 21,450 21,903 22,267 22,534 Operating Current Liabilities

Less: Accounts Payable 16,513 16,201 16,676 13,012 12,837 14,049 13,535 13,265 12,965 12,494 11,900 Less: Income Taxes Payable 556 670 253 182 267 293 313 311 312 313 310 Less: Advances & Billings in excess of Related Cost 9,930 11,449 13,847 9,297 9,754 10,780 10,823 10,735 10,245 11,494 11,427

Total Operating Current Liabilities 26,999 28,320 30,776 22,490 22,858 25,122 24,671 24,312 23,523 24,301 23,637

Net Operating Working Capital (8,510) (9,022) (9,170) (5,469) (5,173) (4,636) (3,834) (2,861) (1,620) (2,034) (1,103)

Plus: Net Property, Plant & Equipment 8,420 7,675 8,265 7,978 9,593 10,798 12,571 13,769 15,208 16,446 18,262 Plus: Other L-T Operating Assets

Net Other Acquired Intangibles 875 1,698 2,093 2,224 2,556 2,442 2,405 2,391 2,385 2,395 2,397 Other Operating Assets 989 2,735 1,258 1,713 2,075 2,168 2,309 2,557 2,536 2,509 2,567 L-T Customer Financing 9,639 8,520 6,777 9,322 9,286 9,892 9,799 10,141 11,051 10,999 10,994 PV Operating Leases 1,995 1,064 1,086 1,086 1,482 1,409 1,354 1,247 1,277 1,309 1,346

Total L-T Operating Assets 13,498 14,017 11,214 14,345 15,398 15,911 15,866 16,336 17,250 17,213 17,305 Less: Other L-T Operating Liabilities

Deferred Lease Income 269 - - - - - - - - - - Non Current Income Taxes Payable - - 1,121 663 847 785 687 531 381 229 76 Other L-T Liabilities - 391 516 386 439 481 501 512 528 537 543 Product Warranties 781 781 962 962 962 962 962 962 962 962 962

Total L-T Operating Liabilities 1,050 1,172 2,599 2,011 2,248 2,228 2,150 2,005 1,871 1,728 1,581

Net Invested Capital 12,358 11,498 7,710 14,844 17,570 19,844 22,453 25,238 28,967 29,897 32,883

ROIC (NOPLAT/Invested Capital)NOPLAT 2,393 (1,110) 6,088 2,565 3,901 4,240 4,565 4,502 4,490 4,499 4,422 ROIC (NOPLAT/Invested Capital) 16.45% -8.98% 52.95% 33.27% 26.28% 24.14% 23.00% 20.05% 17.79% 15.53% 14.79%

Free Cash FlowNOPLAT 2,393 (1,110) 6,088 2,565 3,901 4,240 4,565 4,502 4,490 4,499 4,422 Net Investment (Change in invested Capital) 2,188 860 3,788 (7,134) (2,726) (2,274) (2,609) (2,785) (3,729) (930) (2,985) Free Cash Flow (NOPLAT-Net Investment) 4,581 (250) 9,876 (4,568) 1,174 1,966 1,956 1,717 761 3,569 1,437

Economic ProfitROIC 16.45% -8.98% 52.95% 33.27% 26.28% 24.14% 23.00% 20.05% 17.79% 15.53% 14.79%WACC 9.02% 9.02% 9.02% 9.02% 9.02% 9.02% 9.02% 9.02% 9.02% 9.02% 9.02%EP(Invested Capital*(ROIC-WACC)) 1,081 (2,224) 5,052 1,870 2,562 2,656 2,776 2,478 2,214 1,888 1,726

The Boeing Co.Weighted Average Cost of Capital (WACC) Estimation

Risk Free Rate 4.36%Market Risk Premium 4.82%Beta 1.25Cost of Equity 10.39%Cost of Debt 6.51%Cost of Operating Leases 6.51%

Market Value of Equity 31,949,190,000$ Market Value of Debt 8,160,000,000$ Operating Leases 1,086,000,000$ Total 41,195,190,000$

Weighted Cost Equity 8.05%Debt*(1-Tax Rate) 0.85%Operating Leases*(1-Tax Rate) 0.11%WACC 9.02%

The Boeing Co.Discounted Cash Flow (DCF) and Economic Profit (EP) Model ValuationFiscal Years Ending December

Assumptions: CV growth 3.5%CV ROIC 15%WACC 9.02%Cost of Equity 10.39%

DCF Model 2008E 2009E 2010E 2011E 2012E 2013E 2014E CV

FCF (4,568) 1,174 1,966 1,956 1,717 761 3,569 61,193 Discounted Cash Flow (4,191) 988 1,517 1,385 1,115 453 1,950 33,440 PV of Future Cash Flows 36,658$ Less PV ESOP (124)$ Less PV Debt (8,160)$ Less PV Op Leases (1,086)$ Less Accrued Pension Plan Liability (1,155)$ Less Accrued Retriee Health Care (7,007)$ Plus ST Investments 2,266$ Plus Pension Plan Assets 5,924$ Plus Investments 4,111$ Plus Excess Cash 1067Equity Value 32,495$ Shares Outstanding 740.25 Target Price FYE 2007 43.90$ Target Price 11/13/2008 47.83$

EP Model 2008E 2009E 2010E 2011E 2012E 2013E 2014E CV

Economic Profit 1,870 2,562 2,656 2,776 2,478 2,214 1,888 31,295 Discounted Economic Profit $1,715.43 $2,155.95 $2,050.31 $1,965.16 $1,609.10 $1,319.21 $1,031.53 $17,101.96PV of Economic Profit 28,949$ Invested Capital 7,710$ Less PV ESOP (124)$ Less PV of Debt (8,160)$ Less PV of Op Leases (1,086)$ Less Accrued Pension Plan Liability (1,155)$ Less Accrued Retriee Health Care (7,007)$ Plus ST Investments 2,266$ Plus Pension Plan Assets 5,924$ Plus Investments 4,111$ Plus Excess Cash 1,067$ Equity Value 32,495$ Shares Outstanding 740.25 Target Price FYE 2007 43.90$ Target Price 11/13/2008 47.83$

The Boeing Co.Dividend Discount Model (DDM) Fiscal Years Ending December

2008E 2009E 2010E 2011E 2012E 2013E 2014E CV

EPS 4.15 5.36 5.71 6.39 6.39 6.39 6.38 6.54 Key Assumptions CV growth 2.6% CV ROE 17% Cost of Equity 10.39%

Future Cash Flows P/E Multiple 10.86 EPS(next period) 6.54 Future Stock Price 71.05$ Dividends Per Share 1.88 1.88 1.88 2.00 2.24 2.24 2.24 Future Cash Flows 1.88 1.88 1.88 2.00 2.24 2.24 73.29

Discounted Cash Flows 1.71 1.55 1.40 1.35 1.36 1.24 36.70

Price FYE 2007 45.29$ Price 11/13/2008 49.35$

The Boeing CompanyRelative P/E Analysis

Defense ContractorsEPS EPS Est.

Ticker Company Price 2008E 2009E P/E 08 P/E 09 5yr Gr. PEG 08 PEG 09RTN Raytheon 49.41$ $4.01 $4.60 12.3 10.7 12.50 0.99 0.86 GD General Dynamics 56.20$ $6.18 $6.72 9.1 8.4 9.4 0.97 0.89 LMT Lockheed Martian 75.21$ $7.72 $8.02 9.7 9.4 11.3 0.87 0.83 NOC Northrop Grumman 42.40$ $5.18 $5.41 8.2 7.8 12.8 0.64 0.61 HON Honneywell 28.79$ $3.77 $3.72 7.6 7.7 10.0 0.76 0.77

Average 9.4 8.8 0.8 0.8

BA Boeing 43.16$ 4.15 5.36 10.4 8.0 11.99 0.9 0.7

Implied Value: Relative P/E (EPS08) $ 38.96 Relative P/E (EPS09) 47.26$ PEG Ratio (EPS08) 42.00$ (average PEG ratio * growth * EPS) PEG Ratio (EPS09) 51.05$

Average Price 44.82$

Other Industrial Manufactures EPS EPS Est.

Ticker Company Price 2008E 2009E P/E 08 P/E 09 5yr Gr. PEG 08 PEG 09GE General Electric 16.86$ $1.96 $1.78 8.6 9.5 10.8 0.79 0.87 CAT Caterpiller 39.41$ $5.97 $5.01 6.6 7.9 11.5 0.57 0.68 DE Deere and Company 35.78$ $4.89 $5.64 7.3 6.3 9.0 0.81 0.70 EMR Emerson Electric 35.91$ $3.00 $2.97 12.0 12.1 12.8 0.93 0.94 ITW Illinois Tool Works 33.80$ $3.27 $3.22 10.3 10.5 10.36 1.00 1.01 MMM 3M Co 64.43$ $5.44 $5.45 11.8 11.8 10.9 1.09 1.08

Average 9.4 9.7 0.9 0.9

BA Boeing 43.16$ 4.15 5.36 10.4 8.0 11.99 0.9 0.7

Implied Value: Relative P/E (EPS08) $ 39.17 Relative P/E (EPS09) 51.92$ PEG Ratio (EPS08) 43.09$ (average PEG ratio * growth * EPS) PEG Ratio (EPS09) 56.85$

Average Price 47.76$

Effects of ESOP Exercise and Share Repurchases on Common Stock Balance Sheet Account and Number of Shares Outstanding

Number of Options Outstanding (shares): 16Average Time to Maturity (years): 6.84Expected Annual Number of Options Exercised: 0

Current Average Strike Price: 68.36$ Cost of Equity: 10.39%Current Stock Price: 43.16$

2008 2009 2010 2011 2012 2013 2014 2015Increase in Shares Outstanding: 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000Average Strike Price: 68.36$ 75.46$ 83.30$ 91.95$ 101.49$ 112.03$ 123.67$ 136.51$ Increase in Common Stock Account: - - - - - - - -

Change in Treasury Stock 2,383 (4,641) (1,246) 2,134 265 (137) (226) 2,334 Expected Price of Repurchased Shares: 43.16$ 47.64$ 52.59$ 58.05$ 64.08$ 70.73$ 78.08$ 86.19$ Number of Shares Repurchased: 55 (97) (24) 37 4 (2) (3) 27

Shares Outstanding (beginning of the year) 757 702 799 823 786 782 784 787Plus: Shares Issued Through ESOP 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000Less: Shares Repurchased in Treasury 55 (97) (24) 37 4 (2) (3) 27 Shares Outstanding (end of the year) 702 799 823 786 782 784 787 760

VALUATION OF OPTIONS GRANTED IN ESOP

Ticker Symbol BACurrent Stock Price 43.16 Risk Free Rate 4.62%Current Dividend Yield 1.70%Annualized St. Dev. of Stock Returns 28.40%

Average Average B-S ValueRange of Number Exercise Remaining Option of OptionsOutstanding Options of Shares Price Life (yrs) Price GrantedRange 1 15.84 68.36 6.84 7.81$ 123.71$ Total 15.84 68.36$ 6.84 10.22$ 123.71$

123.71$

1.1 1.15 1.2 1.25 1.3 1.35 1.4 1.454.52% 59.35$ 56.55$ 53.95$ 51.52$ 49.25$ 47.12$ 45.13$ 43.25$ 4.62% 57.96$ 55.20$ 52.64$ 50.24$ 48.01$ 45.92$ 43.95$ 42.11$ 4.72% 56.62$ 53.90$ 51.37$ 49.02$ 46.81$ 44.75$ 42.82$ 41.00$ 4.82% 55.33$ 52.65$ 50.15$ 47.83$ 45.66$ 43.63$ 41.73$ 39.94$ 4.92% 54.08$ 51.44$ 48.98$ 46.69$ 44.55$ 42.55$ 40.68$ 38.91$ 5.02% 52.87$ 50.26$ 47.84$ 45.58$ 43.48$ 41.51$ 39.66$ 37.92$ 5.12% 51.71$ 49.13$ 46.74$ 44.52$ 42.44$ 40.50$ 38.68$ 36.97$

95 105 115 125 135 145 155 16544.00 29.70$ 30.78$ 31.85$ 32.92$ 34.00$ 35.07$ 36.14$ 37.22$ 54.00 34.67$ 35.75$ 36.82$ 37.89$ 38.97$ 40.04$ 41.11$ 42.19$ 64.00 39.64$ 40.72$ 41.79$ 42.86$ 43.94$ 45.01$ 46.08$ 47.16$ 74.00 44.61$ 45.68$ 46.76$ 47.83$ 48.91$ 49.98$ 51.05$ 52.13$ 84.00 49.58$ 50.65$ 51.73$ 52.80$ 53.88$ 54.95$ 56.02$ 57.10$ 94.00 54.55$ 55.62$ 56.70$ 57.77$ 58.84$ 59.92$ 60.99$ 62.07$

104.00 59.52$ 60.59$ 61.67$ 62.74$ 63.81$ 64.89$ 65.96$ 67.03$

12.60% 12.80% 13.00% 13.20% 13.40% 13.60% 13.80% 14.00%60.82% 73.48$ 72.05$ 70.62$ 69.22$ 67.77$ 66.34$ 64.91$ 63.48$ 61.82% 66.34$ 64.91$ 63.48$ 62.08$ 60.63$ 59.20$ 57.77$ 56.34$ 62.82% 59.20$ 57.77$ 56.34$ 54.95$ 53.49$ 52.06$ 50.63$ 49.21$ 63.82% 52.06$ 50.63$ 49.21$ 47.81$ 46.35$ 44.92$ 43.49$ 42.07$ 64.82% 44.92$ 43.49$ 42.07$ 40.67$ 39.21$ 37.78$ 36.36$ 34.93$ 65.82% 37.78$ 36.36$ 34.93$ 33.53$ 32.07$ 30.64$ 29.22$ 27.79$ 66.82% 30.64$ 29.22$ 27.79$ 26.39$ 24.93$ 23.51$ 22.08$ 20.65$

14.49% 14.59% 14.69% 14.79% 14.89% 14.99% 15.09% 15.19%3.35% 46.07$ 46.44$ 46.80$ 47.17$ 47.53$ 47.89$ 48.25$ 48.61$ 3.40% 46.28$ 46.65$ 47.02$ 47.38$ 47.75$ 48.11$ 48.47$ 48.83$ 3.45% 46.50$ 46.87$ 47.24$ 47.61$ 47.97$ 48.34$ 48.70$ 49.07$ 3.50% 46.72$ 47.09$ 47.46$ 47.83$ 48.20$ 48.57$ 48.94$ 49.30$ 3.55% 46.94$ 47.32$ 47.69$ 48.06$ 48.43$ 48.80$ 49.17$ 49.54$ 3.60% 47.17$ 47.54$ 47.92$ 48.30$ 48.67$ 49.04$ 49.42$ 49.79$ 3.65% 47.40$ 47.78$ 48.16$ 48.54$ 48.91$ 49.29$ 49.66$ 50.03$

6.21% 6.31% 6.41% 6.51% 6.61% 6.71% 6.81% 6.91%4.06% 51.36$ 51.16$ 50.96$ 50.75$ 50.55$ 50.35$ 50.16$ 49.96$ 4.16% 50.34$ 50.15$ 49.95$ 49.75$ 49.56$ 49.37$ 49.17$ 48.98$ 4.26% 49.36$ 49.16$ 48.97$ 48.78$ 48.59$ 48.40$ 48.22$ 48.03$ 4.36% 48.40$ 48.21$ 48.02$ 47.84$ 47.65$ 47.47$ 47.29$ 47.11$ 4.46% 47.46$ 47.28$ 47.10$ 46.92$ 46.74$ 46.56$ 46.39$ 46.21$ 4.56% 46.55$ 46.38$ 46.20$ 46.03$ 45.85$ 45.68$ 45.51$ 45.34$ 4.66% 45.67$ 45.50$ 45.33$ 45.16$ 44.99$ 44.82$ 44.65$ 44.49$

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The Boeing Company Sensitivity Analysis

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Boeing Finnancial Analysis 2008