The aerospace industry is soaring to new heights, driven by record-breaking air travel demand in the U.S., a robust airport passenger traffic recovery in Europe, and a burgeoning middle class in Asia fueling aircraft needs. The Boeing Company (BA), alongside Airbus SE (EADSY), dominates the commercial aircraft market with its wide range of jetliners.
However, Boeing has recently struggled with scandals, accidents, and safety issues, compounded by Congressional scrutiny and the Federal Aviation Administration (FAA) production halt related to the Alaska Air (ALK) debacle.
Amid these challenges, the aerospace giant is in dire need of a new direction. That’s where Robert "Kelly" Ortberg steps in. As Boeing’s new CEO, Ortberg, an aerospace veteran, is tasked with restoring the company’s reputation, stabilizing production, and fixing manufacturing flaws, aiming to guide this U.S. manufacturing icon back to stability.
With analysts eyeing a potential double-digit upside for BA stock, and profitability on the horizon in fiscal 2025, is now the time for investors to consider Boeing while it’s down over 35% this year?
About Boeing Stock
The Boeing Company (BA), incorporated in 1916, has soared to become a titan in aerospace and defense, headquartered in Arlington, Virginia. With iconic jets like the 737, 747, 777, and the 787 Dreamliner, Boeing’s planes dominate the skies.
Serving both commercial airlines and military clients, including the U.S. Department of Defense and NASA, Boeing's global reach spans over 150 countries. From cutting-edge jetliners to advanced satellites, Boeing remains a cornerstone in aviation. Its market cap currently stands at $103.6 billion.
Shares of the aerospace giant nosedived 29.6% over the past 52 weeks, with a sharp 35.8% drop in 2024 alone. After peaking at $267.54 in December, BA stock has lost 36.9% of its value, crashing to a year-low of $159.70 after its Q1 earnings release on April 24.
Priced at 1.29x forward sales, BA is cheap; the stock trades at a discount to the aerospace peer Airbus SE, which trades at 1.63x. Plus, it is currently priced at a discount to its own historical valuations.
Boeing Misses Q2 Estimates
On July 31, Boeing’s fiscal Q2 earnings results were mixed, yet the stock popped 2%. Despite the tepid numbers, bullish investors found silver linings in the financials and business updates. However, the excitement fizzled out, with shares sliding 15% over the next five days amid widespread volatility in markets.
Concerns over Boeing’s aircraft safety hit hard in Q2, slashing revenue by 14.6% to $16.9 billion, missing Wall Street’s estimates by 2.8%. The core loss widened 253.7% to $2.90 per share, falling short of projections by 62%.
Deliveries dropped to 92 planes, and the order backlog slipped to $515.9 billion, reversing the backlog growth in Q1. However, with Airbus as its only real competitor, there’s still reason for optimism. Investors might take comfort in knowing that this hefty backlog has the potential to turn around, keeping Boeing in the game. Boeing exited the quarter with cash and cash equivalents of $10.9 billion, while long-term debt increased to $53.2 billion. Plus, its free cash outflow hit $8.3 billion for the first half of the year, a stark contrast to the previous year’s inflow of $1.8 billion.
Notably, Boeing’s acquisition of Spirit Aerosystems Holdings Inc. (SPR) is seen as a strategic move to regain control over part manufacturing and safety protocols. With the Transportation Security Administration’s (TSA) record traveler numbers and expected interest rate cuts both strong indicators for travel demand, Boeing's move positions it to capitalize on these tailwinds.
Boeing is cautiously optimistic about the defense sector's long-term potential and expects increased cash usage this year, with free cash flow projected to grow as deliveries ramp up. Plus, Boeing is focusing on crucial objectives like shutting down shadow factories and maturing defense programs, setting the stage for a stronger 2025. With robust demand and expectations of a near doubling of the global fleet over 20 years, Boeing’s long-term outlook remains positive.
Analysts tracking Boeing predict its loss per share to narrow 34.9% annually to $3.78 in fiscal 2024 and then swing to a profit of $3.52 per share in fiscal 2025.
The Latest C-Suite Addition
Boeing’s Q2 earnings came with a big shake-up. Kelly Ortberg, ex-CEO of Rockwell Collins, is stepping in as Boeing’s President and CEO in a move that’s newly effective as of this week. Ortberg replaces Dave Calhoun, who navigated the rough waters of the 737 MAX crises that tragically claimed over 300 lives.
With over 35 years in aviation and a strong engineering background, Ortberg brings a fresh perspective. Investors are backing the change so far, with BA stock up 3.5% on Aug. 8 on hopes his leadership will steer the company toward smoother skies.
Ortberg’s first move has been relocating to Seattle to be closer to Boeing’s operations, addressing the ongoing safety concerns that have plagued the company. His debut includes meeting with employees in Renton, Washington, and focusing on restoring trust. His immediate goals are ramping up 737 MAX production, securing a labor deal to avert a strike, and tackling supply-chain issues with the 787 Dreamliner.
The aviation industry and investors are closely watching Ortberg’s leadership, hoping his efforts will enhance production timelines and safety standards and ultimately restore Boeing’s reputation.
What Do Analysts Expect for Boeing Stock?
On Aug. 5, Bernstein analyst Douglas Harned lowered BA's price target from $222 to $207 while maintaining an “Outperform” rating. While Boeing’s financials grabbed attention, the bigger story for Bernstein was the impending leadership shakeup.
The brokerage firm is concerned that an external hire could face difficulties navigating Boeing’s complex internal dynamics and vast networks. Plus, the analyst also flagged Boeing’s increasing cash flow issues, defense charges, and rising inventories, though he sees a silver lining in improving deliveries, including the 737 production ramp-up, 777X certification progress, the 787 production recovery, and the restart of deliveries to China.
Analysts are bullish about BA stock’s prospects overall, with a consensus “Moderate Buy” rating.
Among the 23 analysts covering the stock, 15 are highly bullish with a “Strong Buy,” one advises a “Moderate Buy,” six suggest a “Hold,” and one has a “Strong Sell.”
The mean price target for BA is $219.92, indicating an upside potential of 31.5% from current levels. The Street-high target price of $270 implies that the stock could rally as much as 61.5%.
On the date of publication, Sristi Suman Jayaswal did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
