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Aerospace and defense giant Boeing (BA - Free Boeing Stock Report) has released better-than-expected September-period results. For the quarter, although revenues of $20 billion were in line with our prediction, share earnings came in at $1.35, well ahead of the consensus estimate and our call of $1.12. Wider margins at some of its major business units helped support the bottom line. Boeing stock was up modestly in early morning trading on the earnings news.

Despite ongoing economic concerns, both at home and abroad, the Commercial Aircraft division continued to perform well. During the September interim, it delivered 149 planes, compared with 127 a year ago. Revenues at the division advanced 28%, to $12.2 billion. During the quarter, Boeing booked 369 net orders, and its commercial backlog now exceeds 4,100 airplanes valued at more than $307 billion.

The Defense, Space & Security division also put in a solid quarter. Although revenues declined modestly, a better delivery mix helped the operating margin widen by 50 basis points, to 9.5%. Boeing also booked a good deal of new business at this division, and this segment's backlog now stands at over $71 billion, or more than two times the unit's projected 2012 revenues.

Looking ahead, we continue to like Boeing's near-and long-term prospects. Although the U.S. economic recovery is uneven, recession is spreading across the euro zone, and growth in China is slowing, we expect that passenger air travel for business and leisure will continue to increase at a decent rate over the next few years. As a result, we believe that a number of domestic airlines will possess the financial flexibility and eagerness to replace their aging fleets with new, more fuel-efficient and technologically-advanced aircraft. In anticipation, Boeing continues to increase production schedules for some of its most popular models, including the 737, 777, and 787. We also expect significant orders from a number of foreign air carriers; its huge backlog should support full production for many years.

Due to the September-period outperformance, we are raising our 2012 share-earnings estimate to $5.00, which is slightly above management's guidance of $4.80-$4.95. We are currently leaving our 2013 estimate unchanged at $5.60 a share, which would represent a 12% year-over-year increase. Looking further out, we continue to project that Boeing's bottom line will reach $7.25 by the 2015-2017 timeframe.

As for the stock, although it has underperformed the Dow so far in 2012, we continue to like Boeing as a core, long-term holding. At this time, the equity offers worthwhile appreciation potential over the next few years. The dividend is well covered and, earlier this year, the quarterly payout was increased to $0.44 a share.

That said, some risks are present. A good percentage of the company's revenues and earnings are derived from sales to the U.S. military. At this time, automatic defense cuts are scheduled to be triggered on January 1st, unless Congress and the White House come up with a solution. In our view, the federal government will find a way to soften the blow, since it does not want to be responsible for derailing the fragile economic rebound, nor does it want to weaken American military capabilities. However, some programs are bound to be reduced or eliminated, and we expect that Boeing will lose some business over the next several years. On the bright side, the aerospace and defense behemoth has expanded its military sales internationally, a trend that will likely persist for some time. Thus, we think that the company is in a good position to offset most of the probable domestic weakness, though we recommend that current shareholders, as well as prospective investors, monitor government actions in regard to the Defense Budget.

About The Company:The Boeing Company is a leading manufacturer of commercial jet aircraft. It also produces fighters (F-15, F/A-18), C-17 cargo carrier, V-22 helicopter, E-3 AWACS, E-4 command post, E-6 submarine communicator, ground transportation systems, develops the space station, and does work on the F-22 (ATF). In 2011, foreign sales accounted for 50% of overall revenues, and R&D amounted to 5.7% of sales.

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.