Aviation Week In Review: Boeing & United Technologies

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In the past week, Boeing (NYSE:BA) received a large order for its next generation single-aisle airplane, the 737MAX, from Ethiopian Airlines. Separately, Pratt & Whitney’s PurePower engine powered the maiden flight of Airbus A320neo, which is Airbus’ next generation single-aisle airplane. Pratt & Whitney is a segment of United Technologies (NYSE:UTX) engaged in aircraft engine development and production.

Boeing

Last week, Boeing received an order for 20 737MAX airplanes from Ethiopian Airlines, making this the single largest airplane order for the company from an African airline. With this order, the total number of orders received by Boeing for its 737MAX has reached 2,294 airplanes. [1] Deliveries for this next generation single-aisle airplane, which will replace the current generation of Boeing 737s, will begin in 2017. In our view, the 737MAX will constitute a large portion of Boeing’s total commercial airplane deliveries by the end of this decade.

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– We currently have a stock price estimate of $136 for Boeing, around 5% ahead of its current market price.

– Boeing’s stock price has remained approximately flat over the past week.

– We currently estimate Boeing to post revenue of about $90 billion in 2014, compared with its consensus revenue of $89.5 billion.

See our complete analysis of Boeing here

United Technologies

Separately, Airbus’ competitor to Boeing 737MAX, Airbus A320neo, successfully completed its maiden flight Thursday, September 25. The A320neo’s development is running about two years ahead of 737MAX’s development, and accordingly, the A320neo will enter service with airlines in 2015 – two years ahead of 737MAX. Additionally, compared with the 737MAX’s 2,294 order tally through September, Airbus’ A320neo has received 3,257 orders so far. [2]

The A320neo in its maiden flight Thursday was powered by Pratt & Whitney’s PurePower PW1100G-JM engines. [3] Pratt & Whitney has developed its PurePower engine series for the next generation single-aisle airplanes being developed by major global airplane manufacturers including Airbus, Boeing, Bombardier and Embraer. With the first flight of A320neo, Pratt & Whitney’s PurePower engine series is now powering two next generation single-aisle airplanes. The other airplane this engine series is powering is Bombardier’s CSeries, which undertook its maiden flight September last year.

Additionally, even though Airbus has selected both Pratt & Whitney’s PurePower engine and CFM International’s LEAP engine to power its A320neo, the airplane maker chose the former to power the airplane in its maiden flight. This shows that the development of the PurePower engine series is progressing on time. We figure this engine series will play a key role in growing Pratt & Whitney’s revenue in the coming years. Up till now, the PurePower engines have been selected by five airplane makers for their next generation single-aisle airplanes: Airbus A320neo, Bombardier CSeries, Embraer E-jets, Mitsubishi Regional Jets, and Russian Irkut MS-21.

Pratt & Whitney will likely constitute nearly a quarter of United Technologies’ (UTC) revenue in 2014.

– We currently have a stock price estimate of $119 for UTC, around 15% ahead of its current market price.

– UTC’s stock price has fallen by about 4% over the past week.

– We currently anticipate UTC to post revenue of $65.5 billion in 2014, compared with its consensus revenue of $65.3 billion.

See our complete analysis of UTC here

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Notes:
  1. Boeing, Ethiopian Airlines Announce Order for 20 737 MAX 8s, September 20 2014, www.boeing.com []
  2. Airbus-A320neo_INFOGRAPHICS-Sep14, September 26 2014, www.airbus.com []
  3. Airbus A320neo Aircraft Completes First Flight with Pratt & Whitney’s PurePower Engines, September 26 2014, www.pw.utc.com []