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Proprietary Data Insights Financial Pros’ Aerospace & Defense Stock Searches in the Last Month
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Can Boeing (BA) Stage a Comeback?
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The last few years haven’t been easy for Boeing. Safety issues plaguing its flagship Max airplanes, including the infamous door flying off in flight, eventually forced the CEO to resign in disgrace. Yet, they and Airbus are the only two major airplane manufacturers worldwide. So, they aren’t about to go under anytime soon. Recently, we noticed an uptick in search volume in our TrackStar data by financial pros for the beleaguered stock. With earnings over a month away and the stock down almost 27% year to date, we were curious if there was a reason to start dipping our toes into the water. Boeing’s Business As the world’s largest aerospace company and the top U.S. exporter, Boeing has been shaping the future of flight for over a century. The company designs and manufactures commercial and military jetliners, satellites, missile defense systems, and space launch vehicles. Boeing’s comprehensive portfolio encompasses a wide range of products, including the versatile 737, the iconic 747, the efficient 767 and 777, and the state-of-the-art 787 Dreamliner commercial airplanes. The company also offers an array of military aircraft, such as the F-15 Eagle, F/A-18 Super Hornet, P-8 Poseidon, KC-46 Pegasus tanker, and AH-64 Apache helicopter, as well as space exploration vehicles like the CST-100 Starliner and the Space Launch System. Boeing delivers high-performance, dependable products to its commercial and government customers in over 150 countries. The business is segmented into three primary areas:
Following two tragic accidents in 2018 and 2019, which resulted in the loss of 346 lives, the 737 MAX was grounded worldwide. CEO Dennis Muilenberg eventually stepped down, succeeded by Dennis Calhoun, who’s faced serious challenges that eventually caused him to announce his departure at the end of 2024. To manage the crisis, Boeing has slowed production, creating an enormous backlog and severely delayed deliveries to airlines. Many are switching to Airbus where possible. Despite the issues and pressure from the U.S. government, the company is too big to fail. It may struggle with profitability for a while. But ultimately, it will never go under. Financials
Source: Stock Analysis On paper, Boeing doesn’t look so bad. Revenues are down a touch, but otherwise continue to climb. However, this is misleading as many of its customers are fleeing to Airbus or choosing to refurbish existing aircraft. Margins have compressed to the point the company is unprofitable. Yet, it still generates positive cash flow which it has used to reduce its enormous debt left over from the pandemic. Valuation
Source: Seeking Alpha Boeing isn’t currently profitable. But neither is its key supplier, Spirit Aerosystems (SPR). Yet, those more geared toward defense, like Lockheed Martin (LMT) and Northrop Grumman (NOC), are doing splendidly, trading at reasonable P/E and price to cash ratios. Growth
Source: Seeking Alpha Boeing’s growth is misleading, given its massive backlog. Yet, it’s interesting to see the forecasted growth ahead of the more defense oriented names. Notably, Spirit Aerosystems is expecting significant upside in 2024. Profitability
Source: Seeking Alpha While Lockheed and Northrop rake in the profits, Boeing and Spirit are struggling. In Sprit’s case, it’s gone negative on free cash flow. That’s caused both to see poor returns on equity, assets, and total capital.
Our Opinion 7/10 Boeing may be dead money for quite a while. Yet, we wouldn’t dismiss it entirely. The company generates cash and is slowly turning the ship around. It may take years, but we believe it will eventually emerge stronger and more financially stable. |
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