Boeing's Dreamliner Is a 'Greenliner'
Web Editor, "Mad Money"
Cramer has renamed Boeing’s much-delayed – but finally back on track – 787 Dreamliner the “Greenliner.” The giant plane was designed to consume 20% less fuel than its peers. That doesn’t mean Boeing’s the eco-friendly stock investors want, though, since the company outsourced much of the Greenliner’s manufacturing. In fact, to find the best plays, you have to look inside the plane.
Precision Castparts and BE Aerospace make much of the innards of the Greenliner. Not only that, but they’re great stocks to own if you believe, like Cramer does, that there are still multiple years left in the aerospace bull market.
PCP puts about $5 million worth of fasteners and engine components into every Greenliner. So far business from Boeing’s new plane has grown into a $4 billion order book, Cramer quoted CEO James McNerney Jr. saying, which is a healthy chunk of Precision Castparts’ $7 billion fiscal 2008 revenues.
BE Aerospace makes the seats, ovens and oxygen masks Greenliner passengers and crew use while onboard. If 1,000 of these planes are built, CEO Amin Khoury predicts $1.5 billion in revenues just from Boeing’s behemoth, which is almost equal to $1.6 billion BEAV usually takes in.
Don’t think Precision Castparts and BE Aerospace aren’t overexposed to the Greenliner. Both companies run strong businesses in their own right. PCP, in addition to an aerospace division that makes up half its business, also operates a power venture – think coal, nuclear, oil and gas – that makes up 21% of revenues. BEAV, while a pure aerospace play, sees regular income from the refurbishing plane seats need every year or two and replacement they need every four to eight years. Also, BEAV has a nice backlog of business worth $2.2 billion, and most of it’s overseas, out of reach of any potential American recession.
And you don’t have to choose between the two. PCP plays its role early in the Dreamliner manufacturing process, so that stock can be bought now, Cramer said. But there's still some time to get in on BE Aerospace, whose seats and beverage makers are added on later. Either way, though, this sector’s bull market should keep these stocks soaring for some time.
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