Boeing or Airbus: Which Is the Better Stock?

In this podcast, Motley Fool analyst Tim Beyers and contributor Lou Whiteman discuss: More AI-fueled earnings from Micron

The Paris Air Show's big reveals Debating the better stock: Boeing or Airbus

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A full transcript is below

Tim Beyers: Will innovations from the Paris Air Show be enough to lift airlines to new heights

I'm Tim Beyers here with Lou Whiteman, Lou

Lou Whiteman: At least partially caffeinated

Hopefully, that's good enough

Tim Beyers: I mean, I'm fully caffeinated, ready to go

We had some news straight off the top

President Trump preparing to a possible nominee to replace Fed Chairman Jerome Powell

This is, according to the Wall Street Journal, the president could announce his choice for a successor as early as this summer, and this is despite Powell still having 11 months remaining in his term

Then Micron, reporting really strong fiscal Q3 earnings

AI is a thing and is still a thing

Lou Whiteman: It seems to be doing all right for Micron

Tim Beyers: Palantir teaming to build AI software for building nu plants

This is a partnership with a nu company will result in a new software system, I should say, called NOS, the nu operating system

Honestly, I get fast and furious vibes on this one, when I hear NOS I think, cars going really, really fast

Then, finally, Mark Zuckerberg is continuing his AI recruiting press, landing three OpenAI reers in the round

Here, he's spending loads of money

Lucas Beyer, Alexander Kolesnikov and Xiaohua Zhai have all joined Meta for Zuck's super intelligence effort

All three had set up the Zurich office of OpenAI just last year, Lou

I mean, have you gotten an offer from Mark Zuckerberg, Lou

Lou Whiteman: I haven't, but hearing what they've been quoting, I really wish I would

Sam Altman, the CEO of Open I, he telegraphed this, and look, we need a good feud

We need a good rivalry

Let's let this happen

Tim Beyers: There you go

The Lakers/Celtics of the AI world, Meta versus OpenAI

Let's move on to the Paris Air Show, Lou, which is an area of your expertise

I want to talk the CFM rise engine

This was something I thought was absolutely fascinating because to me, this looks a p engine because essentially you take away the nisel

Tell me, what is this thing

I mean, is this a thing that s airlines

I s them a bunch of money

The question is, if and when it's practical

The idea has been around for decades

But composite materials are better

We've made other advancements, so it is getting toward realistic

The nitrous engine would we need to rethink aircraft design

There's a lot of safety considerations, weight considerations

Pratt and Whitney, the RTX company, one of the rivals here

They seem to think they'd be better off just getting efficiency gains by refining their geared turbofan than not doing something new

But hey, the manufacturer, CFM

That's GE space and Safran

I'd love to see it on an airplane

Tim Beyers: I mean, it's some of the concept designs look really fascinating

I remember seeing Rolls Royce engines on DC three aircraft when I was flying back when I was a kid

How big a player today is Rolls Royce in the commercial air market

Because this stock is trading near the CSBA 52 week high

So tell me, are you a buyer here

Lou Whiteman: They're a decent third, but they are definitely third

GEAR space has more than half of the market, including that joint venture we just mentioned

Pratt and Whitney is also ahead of Rolls Royce

Look, Rolls Royce, by the way, they don't make the cars anymore

But it's a quality manufacturer, but they are limited

So that means from the point of view, a lot less spare part sales, a lot less servicing revenue over the lifetime in the engine

Overall, do I the stock

Look, it's a well diversified company

European aerospace stocks have gotten a lot of attention for good reasons

It's a double right now

I don't know if I'd be jumping in right now, but look, they should have good tailwinds, pardon top

There should be they're set up nice to perform from here

Tim Beyers: I mean, we tailwinds, Lou

Lou Whiteman: We need tailwinds

Let's talk Textron here

Having been to Hawaii more than a few times, I am a big fan of the King Air platform

Those are little planes that I have flown between islands

They're inter island planes, and they're fantastic

It looks there's a new multi mission version of the Beechcraft King Air

Let's talk a little bit more this

Honestly, Textron, you know, Ticker TXT, this is a stock that we don't talk very much

Does it deserve a little bit more love from investors

Lou Whiteman: I think it bably does, but in fairness to investors, Textron has made themselves a tough company to love in recent years. [laughs] I don't know if it's all our fault

Textron is one of the last great industrial conglomerates

Aviation, as you mentioned, the Beechcraft, but also Cessna jets

They own bell helicopters, Jacobson lawnmowers

They make all s of things

For a while, every quarter, it seemed inevitably one of those es just laidn egg

Earnings ed, and it has just been a lot of one after the other

In fairness, though, they've done a lot better of late

We're entering a big refresh cycle on jets

Cessna, there's, again, tailwinds there

Bell Helicopter just won a big competition to replace the Black Hawk helicopter

By the way, they'll be using Rolls Royce engines for that, too

That's another thing for Rolls Royce

Look, Textron, they traded a discount to most big Aerospace names

I think they are set up well for at least some of their most important es Bell and Cessna to outperform

If not, I don't know if I'm rooting for this, but this is a conglomerate in an age where a lot of breakups

If they don't catch up with that multiple Tim, I can really see an activist coming in and start looking for ways to do to them what we've done to GE or so many others

Tim Beyers: I mean, that would be interesting

Up next, which is the better stock that we saw at the Paris Air Show

Lou, let's talk which is the better stock here

Airbus, as the European competitor, I mean, we've often talked this

This is the commercial aircraft duopoly

They came out of the Paris Airshow with some deals in hand

Tell me what you think here

It's the who war it best of the Paris Air Show here

Is it Boeing or is it Airbus

Lou Whiteman: Normally, these are huge PR events where Boeing and Airbus will trumpet all the orders they have

But as you say, with the Air India crash, both Boeing and GE Aerospace stayed on the sideline

It was a sober show the we didn't see all the announcements

We can count planes, though, and know how they're doing

Boeing's actually outperforming Airbus for the year, and they may be on track 4,000 or so orders, which would be really, really good because, you said I'd actually say it's been a tough decade for Boeing almost now

I do hope they're on the upswing

They're still under regulatory restrictions on how many planes they can duce

That's important because back when COVID hit, they basically mortgaged every piece of equipment they could find

I mean, Tim, they were taking the staplers off of the desk of the finance department and saying, What can we get for this

It was bably a good move because they didn't know what was coming and they needed to just make sure they had the cash to survive

They need to bring that down, and the way you bring that down is by selling more airplanes and generating the cash flow

I think investors need to understand that even if it all goes perfect from here, we are still years away from Boeing just getting back to normal

Patience is needed, and Airbus is definitely then a cleaner story

But hey, look, this is maybe the greatest commercial aircraft cycle we have ever seen in the history of the

If you are patient and you do believe that the worst is behind it, there's a pretty compelling case for Boeing to make gains as the balance sheet heals and as they just get back to normal in the face of all this demand

Tim Beyers: I mean, you bring up a really interesting point here that that backlog is absolutely extraordinary

There are years of what you would hope is predictable cash flow here

But we do have this tragedy, and that is going to be yet another black mark on Boeing's record

Meanwhile, Airbus continues to do, I mean, relatively well

What do you need to see, if anything, from Boeing in its response to the Air India tragedy that they haven't already done

Lou Whiteman: I think Boeing is doing what they need to do

I mean, we will see it takes months if not longer to figure out what happened

We will see, it's all speculation right now

If it is a material design flaw, I think that that would be material for investors

The Dreamliner has flown for 25 years

Tim Beyers: That's amazing, isn't it

Well, and this is an interesting point, too, not to sidetrack, but one of my biggest fears Boeing long-term is that's their last clean sheet design

They have not sat down a group of engineers in a room and designed a plane since the Dreamliner

They're in no position to do it now

They need to at some point

By the time they do a clean sheet, it's going to be all a group of people that basically don't have that institutional memory

I mean, that, to me, is scary

I think, hopefully with Air India, it was a tragedy No, whoever whatever the finger pointing ends up, but I do think that this is on course to be a more typical tragedy with this, and it shouldn't don't think stunt the turnaround, but, I mean, we're talking years for this turnaround, anyway

There is a lot that can just go wrong in the cycle and all things that I think investors need to get keep in mind before they just get too excited

Little Airline Trivia

You're listening to Motley Fool Money

Lou, we've got a little Trivia game that I want to play with you and all of our listeners here

We would love to see what you guessed in leave a below in whatever wherever you listen to your podcast, just let us know what your guess was

But, Lou, you're a long time er of this industry, and I know you've got some real history related to this question

My question for you is, how many towers help guide aircraft across the United States airspace

I would never try to trick you, Lou

Lou Whiteman: I will say in your part of the world, you can still see, the way we did it before when we actually when we first started aviation, when we put huge giant arrows in the ground, so the pilots could see those from the ground

I'd bably go over, but I don't know

Tim Beyers: It is over

The reason I wanted to kick this off and as we close down the show here, just a quick conversation the long-term opportunity here

The way that we manage air traffic here in the United States is ancient

Lou, any thoughts what is the opportunity here

Because you would think after a while, I mean, surely, we're going to get to the point where we're using satellites

We're going to use more advanced nology to route planes more efficiently

Right now, we route planes according to where the towers are, not the fastest route

That is striking, so your thoughts on this, Lou, before we close up today's show

Lou Whiteman: Now, definitely

I mean, we're using Windows 95 and in some cases, DOS systems, which I'm old enough to remember that, but not to enjoy it

I'm pretty sure most I'd have to find my notes, but we are still in that cess

It's slow, it's expensive

But if you think this, 5, 9, at least

You need redundancies

You need to get it just right

You can't shut down the air system for six months to do a clean reboot

It's just a really complicated blem

Satellites are part of the issue

I don't think that it's just a one vendor thing

There's a lot of companies from L3Harris to Leidos and some of the contractors that are involved

But really, it isn't so much of a huge government boondoggle ject