A smooth takeoff for the 787-9 should help Chicago-based Boeing speed the Dreamliner's production tempo to profit from a backlog of 853 jets worth $146.5 billion, by Bloomberg Industries estimates. The first of two planned Dreamliner derivatives, the -9 accounts for 45 percent of orders for Boeing's largest wide-body program.
The latest Dreamliner features tighter design and manufacturing controls that the world's largest aerospace company is exporting to its 737 Max and other jets in development. Operating free cash flow could double to $15.34 a share by 2016 if Boeing can keep its 787 program on track, Douglas Harned, a New York-based aerospace analyst with Sanford C. Bernstein & Co., said in an Aug. 26 research report.
"Boeing's got it teed up," Gary Bradshaw, a fund manager with Hodges Capital Management in Dallas, said in a phone interview. "If they can execute, it should be a very good stock for a number of years."
Boeing rose 3.9 percent to $115.67 at the New York close -- the highest level in at least 33 years -- after Peter Arment, an aerospace analyst with Sterne, Agee & Leach Inc., raised his price target $44 to $164 per share. Arment, who is based in Birmingham, Ala., predicts its cash will surge as aircraft deliveries increase 24 percent to about 800 annually by mid-decade.
"You're looking at huge upside potential," said William B. Smith, president and senior portfolio manager with SAM Advisors, a Boeing investor.
Boeing is aware of the stakes and created a "disciplined management model" to guide development of the new jet while it was still working to resolve design issues and supply-chain snarls that left the first 787-8 and a redesigned 747 years behind schedule, said Scott Fancher, Boeing's vice president and general manager of airplane development.
"It's a complex challenge to define the right combination of design and build improvements for a derivative while you're developing the parent airplane," Fancher said last month in an interview in his Everett office. "Despite that complexity, we loaded the -9 into the factory the very day we scheduled over 2 1/2 years ago. The airplane is actually lighter today than we thought it would be three years ago."
The latest Dreamliner is 20 feet longer than the 787-8 and seats 40 more people, which should boost its operating economics for airlines, Richard Aboulafia, vice president with Teal Group, a consultant based in Fairfax, Va., said.
The 787-9 also features new passive hybrid laminar flow control technology to reduce drag, according to Fancher, who declined to discuss specifics.
Boeing's system may involve suction that circulates air through the leading edges or surface of the plane's horizontal and vertical stabilizers to reduce turbulent air flow, Robert Mann, an aerospace consultant, said in a phone interview.
"By doing so, you reduce drag while maintaining the desired lift," said Mann, who heads R.W. Mann & Co., based in Port Washington, N.Y. Increasing the efficiency of the plane's surface could boost its fuel efficiency "a couple percent," he added.
Doug Alder, a Boeing spokesman, declined to comment on fuel savings for the 787-9.