Is Boeing a Buffett Stock?


We can't know for sure whether Buffett is about to buy Boeing (NYS: BA) -- he hasn't specifically mentioned anything about it to me -- but we can discover whether it's the sort of stock that might interest him. Answering that question could also reveal whether it's a stock that should interest us.


  1. Consistent earnings power.
  2. Good returns on equity with limited or no debt.
  3. Management in place.

Does Boeing meet Buffett's standards?

1. Earnings power

Let's examine Boeing's earnings and free cash flow history.


Source: S&P Capital IQ.

Over the past five years, Boeing's earnings have fluctuated a bit with economic volatility, though the company has managed to remain profitable.

2. Return on equity and debt



Debt-to-Equity Ratio

Return on Equity

5-Year Average Return on Equity

United Technologies (NYS: UTX) 48%22%23%
Honeywell (NYS: HON) 69%23%19%
Lockheed Martin (NYS: LMT) 239%82%55%

Source: S&P Capital IQ.

Boeing produces extraordinarily high returns on equity, though part of that is due to the company's above-average debt-to-equity ratio. (Return on capital is a more modest but still impressive 18%).

3. Management
CEO James McNerney has been at the job since 2005 after spending years at industrial conglomerates 3M and General Electric.

4. Business
While aviation requires constant research and development, it hasn't been particularly subject to technological disruption for some time.

The Foolish conclusion
Regardless of whether Buffett would ever buy Boeing, we've learned that while its earnings can be somewhat volatile, and the company employs considerable leverage, it does exhibit many of the characteristics of a quintessential Buffett investment: high returns on equity, tenured management, and a technologically straightforward business. To stay up to speed on the top news and analysis on Boeing or any other stock, simply add it to your stock watchlist. If you don't have one yet, you can create a watchlist of your favorite stocks.



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