Move Over, GE Aerospace: This Aerospace Stock Deserves Your Attention Instead

GE Aerospace (NYSE: GE) is a fine and worthy stock, and it deserves a premium rating for the surety of its long-term stream of recurring earnings and cash flow coming from servicing its commercial aerospace engines.

However, many of the assumptions necessary to justify its valuation also support a higher valuation for Boeing (NYSE: BA). Here's why I think investors should take a closer look at Boeing as a value play in the industry.

The case for Boeing stock

I'm not arguing that Boeing doesn't face challenges, not least from internal execution issues and the ever-present risk of a cyclical slowdown in its end markets. I also believe that the issues it's had with the 737 MAX mean that it's almost missed the cash cycle with the aircraft, whereby the cash flow from one narrow-body fund funds the massive investment needed to develop the next one. In addition, its defense arm, Boeing Defense, Space & Security (BDS), continues to generate negative or meager profit margins as it takes charges on high-profile fixed-price development programs.

Still, many of these issues are already reflected in the valuation, and there's clear evidence that Boeing is, albeit slowly, turning them around. As such, Boeing is the value play in the sector.

Boeing's valuation discount

The aerospace sector tends to trade at a premium to reflect long-term growth prospects, as outlined with GE Aerospace. It's also reflected in the valuation of an advanced material supplier like Hexcel (NYSE: HXL). The two companies are useful to compare Boeing with because GE Aerospace relies on a combination of new engine sales to increase its installed base and ultimately drive long-term, highly profitable services revenue that can last for over 40 years.

GE Aerospace needs new aircraft production and a buoyant travel market (which drives services growth). Meanwhile, Hexcel is almost entirely dependent on new aircraft production (mainly from Airbus, Boeing, and their suppliers), as well as on an increase in the build of advanced composite-rich wide-body aircraft.

With that in mind, does Boeing, which is one-half of the effective duopoly in the large commercial jetliners market, and whose aircraft production and utilization, a key part of earnings at GE Aerospace and Hexcel, deserve the kind of valuation discount implied from 2028 onward?

Image source: Boeing.

It's a genuine question because if you are assuming that demand for aircraft engine equipment and servicing (GE Aerospace) will hold up and that aircraft build rates improve (Hexcel), you are making a whole bunch of assumptions that are positive for Boeing.

For example, since CFM International (a GE Aerospace joint venture) provides the sole engine option for the Boeing 737 MAX and GE Aerospace provides the sole engine for the new wide-body Boeing 777X, every time those aircraft are ordered, both Boeing and GE Aerospace benefit. Meanwhile, 61% of Hexcel's sales go to the commercial aerospace end market, with 77% of those going to Airbus, Boeing, or their subcontractors.

Data source: Visible Alpha. Table by author.

Is the market overly pessimistic about Boeing?

Boeing's overall backlog currently stands at a record $715 billion, with Boeing Commercial Airplanes (BCA) backlog at a record $597 billion, representing more than 6,200 planes. Given this level of end-demand strength and its valuation discount relative to peers, it's clear the market has concerns about Boeing.

However, the two main concerns have seen definitive signs of progress since Kelly Ortberg took over as CEO in August 2024. First, Boeing is ramping production of the 737 MAX from 42 a month to 47 a month this summer, and Ortberg doesn't see "any supply chain constraints relative to moving to rate 52," although he acknowledges that moving from 52 a month to 57 a month will be harder. Still, it's real progress on the No. 1 issue that has dogged the company in recent years.

Image source: Getty Images.

Second, BDS is slowly working through the highly problematic fixed-price development projects that have been the real cause of its lack of profitability. One example of this is VC-25B (Air Force One) presidential transport, which took another $280 million charge in the second quarter.

Still, management expects BDS's overall operating margin of 2.5% for 2026. That may not sound like much, but it's still a big improvement on the negative 0.5% margin in 2025 and evidence that it's slowly working through contracts like VC-25B.

All told, Boeing isn't perfect, but value stocks rarely are, and on a relative and absolute basis, Boeing is an attractive stock.

Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Boeing and GE Aerospace. The Motley Fool recommends Hexcel. The Motley Fool has a disclosure policy.