While its components have changed quite a bit since its inception as an industrial benchmark - Salesforce.com (CRM), anyone? - the Dow Jones Industrial Average ($DOWI) is still a widely followed equity index on Wall Street. Made up of 30 major U.S. companies, the Dow might provide a somewhat narrower snapshot of the stock market than the S&P 500 Index ($SPX), or the sprawling Nasdaq Composite ($NASX) - but Dow stocks still have a reputation as being giants of their respective industries, and the index's price swings are worth tracking.
On a year-to-date basis, the Dow is barely holding its head above water. It's up about 3% YTD, compared to 30% for the Nasdaq and 14% for the S&P 500. One stock that's been kind of a drag? Boeing (BA), as the $116 billion aerospace giant has pulled back by nearly 20% in just the past three months.
Over the longer term, though, BA has outpaced the broader market with a 16% gain in the last 52 weeks - and analysts see quite a bit more upside ahead over the next year.
So, is the recent pullback a buying opportunity on this blue chip stock? Here's a closer look at Boeing's performance and future potential.
Why Is Boeing Stock Down?
The recent drop in the stock was sparked by Boeing reporting a bigger-than-expected net loss of $1.64 billion in Q3 2023. It marked the fifth quarter in a row of losses for Boeing, which also lowered its forecast for full-year 737 production.
In addition to ongoing expenses tied to manufacturing flaws, Boeing has swallowed steep losses on expensive contracts, including its Air Force One project.
However, Q3 revenue went up by 13% to $18.1 billion, edging past expectations. Boeing's CEO, Dave Calhoun, is confident the company is still on track to meet its financial goals for this year and beyond.
What's in the Pipeline for Boeing?
Boeing has a massive backlog of orders, sitting at a cool $469.2 billion. That's up 7% from the second quarter and a whopping 23% higher than a year ago. It's the biggest backlog they've had since 2019, showing they've got a ton of business lined up - with quite a bit of it contractual.
A significant overhang for Boeing has been tied to lingering manufacturing issues with its 737 MAX planes. An agreement with their supplier, Spirit AeroSystems (SPR), provides some much-needed clarity on how this will impact Boeing for years into the future. And there's a recent deal with Vietnam Airlines in the works – they're looking to buy 50 Boeing 737 Max jets, worth $7.5 billion.
Plus, Boeing's management reiterated its goal of raking in $3 billion to $5 billion in free cash flow for the year. That's a good sign - but Boeing's not out of the woods yet. They're still dealing with production delays, high manufacturing costs, and sensitivity to what's in the headlines.
Wall Street's Forecast for Boeing
Despite the tough times Boeing has faced since about 2018, Wall Street experts are feeling pretty good about the company's future. Right now, Boeing is expected to return to profitability in Q1 2024, with an average earnings estimate of $0.20 per share.
For fiscal 2024, the average earnings estimate is $3.31 per share, which would signal a strong recovery from the expected $5.61 per share loss this year.
These analysts are pretty stoked on Boeing, giving it a consensus “strong buy” rating. Out of 16 analysts, 13 are saying “strong buy,” and 3 are playing it safe with a “hold” - and none of them are shouting “sell.”
The analyst squad has a mean price target on Boeing of $245.06, suggesting it could shoot up by 28% from current levels.
Conclusion
Boeing isn't your typical "set it and forget it" kind of investment. If you're the kind of investor who can hop in and ride out the ups and downs without breaking a sweat, then buying the stock while it's down might be a smart move.
But, despite being a “boring” Dow stock, the loss-making Boeing probably shouldn't be the bedrock of your portfolio. So, while analysts are optimistic, be aware of the risks and make sure this volatile stock fits your investment style.
On the date of publication, Ebube Jones 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.
