CALLBAabout 1 month ago10.1Kviews

Boeing: services revenue is compounding under a cyclical label

Aftermarket and services now contribute the majority of segment profit and grow independently of the equipment cycle. The whole company is still valued as a cyclical.

Raphael Moreau@raphael_moreau

The mechanism is the installed base. Equipment sold years ago generates parts and service revenue at higher margin and lower cyclicality, so the profit mix is far less cyclical than the revenue mix. Segment reporting carries it. Aftermarket contributed the majority of segment operating profit while representing a minority of revenue, and it grew in a year when equipment did not. The position: long on Boeing, entry locked at publication and the exit dated rather than open-ended. The target is stated in the call block above and the horizon with it. Sized to the catalyst rather than to conviction, with the invalidation written into the kill-switch card instead of left implicit. Execution risk on three simultaneous plant startups is real and has been mispriced in this industry before.

Discussion · 9

Yael BrennerAUG 14

I think the setup matters more than the thesis here. The distinction between adequate reserves and the earnings path is well made. How much of this do you think is already in the buy side's numbers?

Sam WhitfieldAUG 13

Strong piece, one objection. Splitting volume from price is what makes this legible. How much does this depend on the macro cooperating?

Raphael MoreauAuthorAUG 12

Fair challenge. Invalidation is a close below the lock price on volume, and I should have written that into the card rather than leaving it implicit. (991)

Yael BrennerAUG 12

Good piece. The elasticity decay across the price actions is the tell. What would you need to see to add rather than hold?

Noa BergmanAUG 12

Strong piece, one objection. I had not appreciated how much of this is already in consensus. Interested in what the kill switch looks like in practice.

Ines FerreiraAUG 12

I have been waiting for someone to make this argument. The mix argument is the part I had not considered properly. Interested in what the kill switch looks like in practice.

Ines FerreiraAUG 12

Strong piece, one objection. The installed base argument is stronger than the cycle argument here. Is there a cleaner way to express this than the equity?

Dana KatzAUG 12

Useful framing. The lag between intake and revisions is the whole trade. What is the base rate on this kind of setup working?

Dana KatzAUG 11

Respectfully, I think this overstates it. The cohort split is the detail that everyone leaves out. Any view on how the read-across affects the rest of the group?

Discussion · 9

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