Tuesday, November 17, 2009

Free Cash Flow Yield chart of the day - Boeing (BA)

Boeing has been besieged with news stories about delays with its new 787 Dreamliner. The further this plane's delivery date gets pushed back, the likelier they'll see cancellations and loss of confidence from clients. Fortunately for Boeing, competitor Airbus is up to its ears with problems of its own.

The company is more diversified than most people give it credit for. That said, rationalization of defense spending combined with an airline industry hell-bent on reducing excess capacity make this a difficult time for Boeing. Add to that the dismal environment for its customers to obtain credit, and it only gets worse.

What caught my eye today was a recent $1.2billion worth of three and seven year notes sold by Boeing, for interest rates of 1.9 and about 4%, respectively. That's DIRT CHEAP. It might confirm some people's view that the corporate bond market is getting a little too frothy.

Anyway, it's a low-low cost of financing, especially compared to Boeing's potential 2010 Free Cash Flow Yield(FCFY).

Copyright 2009 AlphaNinja


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