(BY Mani) Aircraft maker Boeing Co
) is expected to do well in this year's Farnborough Airshow to be held between July 9 and July 15.
The Farnborough Airshow, an important industry event, is an international trade exhibition for the aerospace industry held at the Farnborough airport in England. The biannual event occurs in mid-July on even numbered years (e.g., 2012) and alternates with the Paris airshow that takes place on odd-number years (e.g., 2013) in mid-June.
Aircraft manufacturers have historically used the show to announce new products and broadcast new order announcements. Although the show tends to see some major new orders and other industry announcements, it is also a useful event to gauge the state of industry sentiment.
Last year's record bookings at the Paris Airshow were dominated by Airbus, which racked up 730 commitments, including 667 A320 New Engine Options (NEOs) .
"In contrast to Airbus' dominance at last year's Paris show, we expect Boeing to do better at this year's show," RBC Capital Markets analyst Robert Stallard wrote in a note to clients.
The 737 MAX has a number of commitments that could be announced at the show, and Boeing has indicated that some 747-8i orders are in the pipeline. However, some of the usual Airshow suspects look set to be absent this year, with Emirates and Qatar having already placed significant new aircraft orders in recent years.
Boeing's 737 MAX to be the most announced aircraft and it has already garnered some of its main launch orders including Lion Air, Southwest, Norwegian and United Continental Holdings, Inc. (NYSE:UAL).
Boeing has called 2012 "the year of the MAX" as it looks to convert its purported 1,000 commitments into firm orders, with about 550 yet to be publicly announced.
If the recent slowdown in commercial aerospace orders has indeed been responsible for the diluted investors' response to the Boeing 787's success, the Farnborough Airshow could provide some timely reassurance.
Meanwhile, AirAsia has been reported to order more A320s, potentially converting an option for 50 NEOs from last year as it accelerates its expansion plans. In widebody land, Turkish could make an announcement between the A380 and 747-8i (passenger variant), with a potential 15 plane order in the works.
If recent history is any guide, Boeing and its customers have likely kept a number of new order announcements on ice, in hopes that they might garner fuller appreciation on the year's more renowned commercial airshow.
"To be clear, we believe the weak order trend over recent months are symptomatic of potentially lasting headwinds—namely, a weak macro economy and a commercial airline industry that has already placed the lion's share of orders for new planes needed for the next decade," Oppenheimer analyst Yair Reiner said in a client note.
Still, even a temporary flush of new orders at Farnborough could create the reprieve investors need to focus on the program that could, almost single-handedly, drive Boeing's stock in the years ahead.
Meanwhile, the trend in the last several airshows suggests that Boeing's order slowdown in the lead up to this year's trade exhibition is quite typical, and that the company generally records a meaningful pickup beginning in the month of the show and for three months thereafter.
While this year's show once again takes place against the backdrop of considerable macro-economic uncertainly, the large book of 737max commitments provides Boeing with a strong foundation heading into the event.
A review of Boeing's stock performance in the weeks around the Farnborough and Paris Airshows suggests that the exhibitions are fairly reliable catalysts, but also fleeting ones in the absence of more lasting fundamental drivers.
"Over the last five years, Boeing's stock has on average outperformed the broader market by approximately 125 bps in the 14 days of trading leading up the show," Reiner noted.
However, that outperformance vanishes within the next fortnight as investors look past the hype and refocus on core, lasting fundamentals.
Given the recent drought in orders, the show could provide the shot of reassurance needed to refocus investors on the subtler, longer term story.