Is Boeing Stock Set to Rebound?

Leading aerospace company The Boeing Company (NYSE:BA) has faced troubles with flight safety issues pressurizing the stock, which is down 25.7% year-to-date. 

That’s no surprise given the virtual laundry list of issues associated with the company right now. Boeing is facing a host of negative headlines stemming from an incident in January when a 737 Max 9 was headed to Ontario carrying 171 passengers and six crew members. After a section of the plane blew out, it returned to Portland shortly after departure.

Although no serious injuries were reported, the event was a huge setback for the company. Alaska Airlines temporarily grounded its fleet of 65 Boeing 737 Max 9 flights. This was reflected in Boeing’s first-quarter results for fiscal 2024 when quarterly revenue fell by 8% year-over-year to $16.57 billion as the company took action to slow down the production of 737 models.

But that’s not the only issue Boeing has faced, and the question is whether it can earn back trust among airlines who buy its planes and customers flying them?

Boeing Issues Grow

The troubles have mounted for Boeing in recent year. For example, Boeing agreed to plead guilty to a charge related to two crashes of 737 Max planes in 2018 and 2019, both of which were fatal.

In the Alaska Airlines case, the Department of Justice revisited the previous cases to decide whether Boeing had violated a settlement from 2021 tied to those two crashes. The plea deal allowed the company to pay an additional fine of $243.6 million with compliance monitoring.

Yet Boeing isn’t just an airline manufacturer. There are problems in space too. After multiple delays, Boeing’s Starliner spaceship finally launched in June, carrying two astronauts bound for the International Space Station (ISS). As of this writing, the spaceship’s return to Earth has been delayed due to mechanical issues, leaving the astronauts stranded.

In other developments, Boeing has decided to buy back fuselage maker Spirit AeroSystems Holdings (NYSE:SPR) in an all-stock deal worth $4.7 billion. Spirit AeroSystems was spun out from Boeing in 2005. The deal is expected to close next year and offers hope that Boeing’s supply chain can be improved.

Following a host of embarrassments, Boeing’s CEO David Calhoun has said he will step down from his post this year. The final straw that may have broken the camel’s back so to speak was testifying to congress when he admitted to not being an engineer, and so assertions were cast that he was simply engaging in financial engineering at the cost of quality control.

The company has been looking for someone capable of filling that post, and it might have found its replacement in Spirit’s CEO, Patrick Shanahan, although this is only speculation for now.

How Have Boeing’s Annual Financials Been?

Boeing’s financials have been gyrating for a few years now. For example, in 2020, a year of disruptions for many companies, especially travel-related firms, Boeing suffered a sharp pullback.

The company’s annual top line declined by 24% in 2020 compared to 2019. The next two years were periods of gradual revenue recovery and by 2023, Boeing finally rose above the pre-pandemic total revenue level for the first time, posting a revenue figure of $77.79 billion.

The airplane manufacturer has faced solid demand even during some tough macro conditions. For example, in 2020, the company reported a total backlog of $363 billion, including more than 4,000 commercial planes. These backlog figures have only grown over the years.

In spite of all the problems, Boeing commands a 40.6% market share in the airplane manufacturing industry, while Airbus has a 60.4% market share so it’s in the interests of all stakeholders to keep Boeing alive.

In order to do so management will need to make a concerted effort to improve the bottom line. Looking back to 2019, the company had posted negative annual bottom-line figures every year. Net income over the past 3 years alone has accumulated to a loss of nearly $10 billion.

With that said, Boeing can survive a sharp drawdown in cash thanks to a rich balance sheet that has over $15 billion in liquid reserves. Nonetheless, shareholders won’t take a whole lot of comfort knowing such a discussion is even being had for the former premier plane manufacturer.

Is Boeing Stock Set To Rebound?

Boeing stock is unlikely to rebound anytime soon following 14 analysts downgrades in the most recent quarter.

The company is plagued by a host of issues at this time. The primary issue is the lack of trust both plane buyers and customers have in flying Boeing planes given the manufacturing defects that have grown in recent years.

Financially, the firm also suffers from weak gross margins that have not helped the bottom line. When you combine the lack of profitability over the past year with the expectations for losses once again this year, it’s hard to be anything but pessimistic.

If there was one ray of sunshine, it would be the consensus forecast among 25 analysts at this time now is for the share price to climb back to $218 per share.

The low end of the range is $180 per share while the high-end forecast sits at $275 per share, which seems unlikely anytime soon until the anchor manufacturing defects has been fully addressed and consumers grow in confidence that the worst is of the problems are in the rearview mirror.

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