After a string of major incidents and scandals, the aerospace giant’s prospects hang within the balance
Boeing (NYSE:BA) has dominated the business pages these days, mainly regarding the safety of its 737 planes and the resulting whistleblower allegations.
The aircraft manufacturer made headlines again on Monday after announcing that it had agreed a $4.7bn deal to purchase parts supplier Spirit AeroSystems. The news was warmly received by the market, with the stock retreating just barely.
Nevertheless, partly due to the recent and ongoing scandals, Boeing stock continues to be down almost 30% YTD.
Several experts have predicted a significant crash for Boeing stock, but there are hints of a turnaround for the aerospace giant.
Spirit acquisition – The ticket to delivery growth?
Boeing has faced quality control issues prior to now, leading to delivery delays. For example, Boeing’s 737 Max was grounded for nearly two years following two fatal crashes in 2018 and 2019.
Moreover, in January 2024, the FAA stopped the production of the 737 Max after an Alaska Airlines flight suffered a mid-air blowout of its cargo door earlier this 12 months.
Nevertheless, Boeing still has ambitions of growing its delivery numbers, with the Spirit acquisition highly more likely to bolster this effort. This could significantly boost Boeing Industrial Airplanes’ (BCA) margins as the corporate clears its multi-year backlog.
Moreoverer, because the acquisition is an all-stock deal, Boeing can avoid using its precious money reserves.
Following the news, investment banking firm Jefferies reiterated its buy rating on the stock with a price goal of $270, representing a forty five% upside to the present price. The evaluation also noted that the deal might dilute Boeing’s earnings per share (EPS) for 2026, but that the advantages from the deal shall be “priceless”.
Deutsche Bank also maintained a buy rating on the stock with a $225 price goal. The bank noted that an equity-financed deal is healthier than a money offer and that an equity offering would help move the share price up because of reduced liquidity risk.
Disciplined money flow management
Boeing has also reported positive free money flow over the past 12 months. Though the corporate has not paid dividends or repurchased its common stock for a while, it did repay over $5 billion in debt during FY23. That is indeed an indication of disciplined money flow management.
In Q1, Boeing’s top and bottom lines were above Wall Street estimates. Still, revenue for the corporate was down mainly because of a decline in total industrial airplane deliveries. The corporate shall be hoping to beat this issue with the acquisition of Spirit.
We’ll get a greater idea of the corporate’s plans when it reports its Q2 numbers towards the top of July.
Promising stock performance
Regardless that Boeing stock is down significantly from $215 in early January 2021 to about $185 now, it has still outperformed the S&P 500 within the last two years.
Boeing stock returned -6% in 2021, -5% in 2022, and 37% in 2023. The S&P 500 returned 27% in 2021, -19% in 2022, and 24%, suggesting Boeing underperformed the S&P in 2021 alone.
It is difficult to evaluate whether the stock will outperform S&P in 2024 considering the present uncertain macroeconomic environment, with high oil prices and rates of interest on top of Boeing’s own 737 MAX issues. Still, several analysts consider the stock has ample room for growth.
Is Boeing stock a buy?
There is no such thing as a denying that Boeing needs to handle a couple of key issues within the short term – growing delivery backlog, potential charges from the Department of Justice related to the 2018 and 2019 crashes of the 737 Max aircraft, and the seek for a recent CEO – before it will possibly pull off a turnaround.
Nevertheless, Boeing is moving in the suitable direction, and while it will be fair to say that the firm faces near-term headwinds, its long-term growth prospects look promising.
Based on this, we predict Boeing stock could be a wise buy at once.