Boeing vs L.M. - Financial Statements Analysis
Financial Statement Analysis
Western Michigan University
Department of Accountancy
Fall 2013
By: Adam A. Marshall
Introduction:
The following is a careful, financial statement analysis of two competing companies, Boeing Corporation (Boeing) and Lockheed Martin Corporation (Lockheed), in the aircraft, aerospace and defense industries. The format of the following paper coincides with the financial statement analysis process, as discussed in Financial Reporting, Financial Statement Analysis, and Valuation, A Strategic Perspective (the textbook) by Wahlen, Baginski and Bradshaw, which, involves a six-step interrelated sequential process. Those six steps, in sequential order, are as follows: identify economic characteristics and competitive dynamics in the industry, identify company strategies, assess the quality of the financial statements, analyze profitability and risk, project future financial statements, and value the firm. This process is applied to both Boeing and Lockheed, after which, based upon our analysis, we will decide how we would make an investment allocation between the two competing companies.
Step 1: Identify Economic Characteristics & Competitive Dynamics in the Industry
Boeing:
Boeing operates in five principal segments: commercial aircraft, military aircraft, network and space systems, global services and support, and capital services. All market segments experience significant competition and the overall industry could be described as an oligopoly, in which, a relatively small number of firms dominate the market while producing differentiated products, as extremely high barriers to entry exist, given the capital intensive nature of the industry.
Boeing describes the competitive nature of their operations in their annual 10-K report, as follows:
“The commercial jet aircraft market and the airline industry remain extremely competitive. We face aggressive international competitors
Western Michigan University
Department of Accountancy
Fall 2013
By: Adam A. Marshall
Introduction:
The following is a careful, financial statement analysis of two competing companies, Boeing Corporation (Boeing) and Lockheed Martin Corporation (Lockheed), in the aircraft, aerospace and defense industries. The format of the following paper coincides with the financial statement analysis process, as discussed in Financial Reporting, Financial Statement Analysis, and Valuation, A Strategic Perspective (the textbook) by Wahlen, Baginski and Bradshaw, which, involves a six-step interrelated sequential process. Those six steps, in sequential order, are as follows: identify economic characteristics and competitive dynamics in the industry, identify company strategies, assess the quality of the financial statements, analyze profitability and risk, project future financial statements, and value the firm. This process is applied to both Boeing and Lockheed, after which, based upon our analysis, we will decide how we would make an investment allocation between the two competing companies.
Step 1: Identify Economic Characteristics & Competitive Dynamics in the Industry
Boeing:
Boeing operates in five principal segments: commercial aircraft, military aircraft, network and space systems, global services and support, and capital services. All market segments experience significant competition and the overall industry could be described as an oligopoly, in which, a relatively small number of firms dominate the market while producing differentiated products, as extremely high barriers to entry exist, given the capital intensive nature of the industry.
Boeing describes the competitive nature of their operations in their annual 10-K report, as follows:
“The commercial jet aircraft market and the airline industry remain extremely competitive. We face aggressive international competitors