THE BOEING CO. $107 (New York symbol BA; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 758.7 million; Market cap: $81.1 billion; Price-to-sales ratio: 1.0; Dividend yield: 1.8%; TSINetwork Rating: Above Average; www.boeing.com) is a leading maker of passenger jets.

The company launched its latest plane, the 787 Dreamliner, in 2011. The 787 uses advanced materials that are lighter than aluminum. That makes it 20% more fuel efficient than comparable planes. It also features state-of-the-art jet engines and electronics.

Headline risk adds to volatility

The new plane is off to a rocky start. In early 2013, air travel regulators grounded all 787s in response to a problem with the lithium-ion batteries that power the electrical systems. Boeing has since fixed the problem, but the stock remains sensitive to any bad news regarding the 787.

The 787 is just a small part of Boeing’s commercial jet division, which accounted for 53% of its 2012 revenue and 61% of its earnings. Most of the remaining 47% of its revenue and 39% of its earnings came from making military aircraft and satellites.

Boeing’s revenue rose 12.1%, from $60.9 billion in 2008 to $68.3 billion in 2009. Revenue recovered to $64.3 billion in 2010, and rose to $81.7 billion in 2012.

Earnings fell 48.5%, from $3.63 a share (or a total of $2.6 billion) to $1.87 a share (or $1.3 billion) in 2009. That’s due to extra costs to correct problems with the 787’s wings and fuselage that arose during the testing phase. Earnings quickly rebounded to $4.46 a share (or $3.3 billion) in 2010 and rose to $5.11 a share (or $3.9 billion) in 2012.

Even with the recent 787 setbacks, demand for the company’s planes continues to rise as airlines replace their aging jets with new, more efficient models.

Rising backlog cuts Boeing’s risk As of June 30, 2013, Boeing’s commercial aircraft order backlog was $337.7 billion, up 6.4% from $317.3 billion at the end of 2012. However, governments continue to cut defence spending as they deal with rising budget deficits. As a result, Boeing’s defense backlog fell 6.5%, to $51.5 billion from $55.1 billion. If you include preliminary orders that are not yet binding contracts, Boeing’s total backlog of $410.3 billion is equal to roughly five years of revenue.

Now that the 787 has moved from the design phase to production, Boeing is spending less on research: $763 million (or 3.5% of revenue) in the second quarter of 2013, down 11.0% from $857 million (or 4.3% of revenue) a year earlier. The company is also applying the knowledge and expertise it gained while developing the 787 to its other planes.

Strong balance sheet is a big plus

Lower research spending has freed up cash for debt repayments. In the first half of 2013, Boeing cut its long-term debt by 3.1%, to $8.7 billion. That’s a low 11% of its market cap. It also held cash of $14.3 billion, or $19.00 a share. The company will probably earn $6.30 a share in 2013, and the stock trades at a reasonable 17.0 times that forecast. The $1.94 dividend yields 1.8%.

Boeing is a buy.