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Boeing Co. (BA) Quarterly Report for Maverick Investors

November 6, 2023,   $192.95

Business Overview:

  • Boeing is a prominent aerospace company known for commercial aircraft like the 737, 747, 767, 777, and 787, as well as other products, including business jets, fighter jets, helicopters, guided weapons, satellites, and space launch systems. In 2022, foreign sales comprised 41% of its total revenue, and it allocated 4.3% of sales to research and development. The company, led by Chairman Lawrence W. Kellner and CEO David L. Calhoun, is headquartered in Chicago, IL, and employs 156,000 people.

Maverick Guidance:

  • Boeing has been working for the past year on increasing production and addressing challenges, with improvements in financial results and backlogs. However, many years of consecutive losses continue.
  • 2024 looks to be an impressive turnaround with positive quarterly earnings. However, until we see evidence of this turnaround, Boeing (BA) has no place in any Maverick portfolio. Excessive volatility.
  • The next 10-year total return will exceed the +5.59% (4th Quartile) of the past 10 years until Nov. 3, 2023. Likely in 2024, BA will become an appropriate holding for some Mavericks.
  • Double Top Breakout on November 2, but this stock is not on our portfolio candidate list.

Consideration for Maverick Portfolio:

X = Not appropriate in any portfolio for Maverick investors.

Market Guidance:

  • Consensus Analyst Ratings— MarketBeat = Moderate Buy, TipRanks = Moderate Buy
  • 18 Wall Street analysts have offered 12-month price targets in the last 3 months. There are 13 Buy, 5 Hold, and zero Sell. (from TipRanks)
  • Based on 18 Wall Street analysts offering 12-month price targets in the last 3 months, the average price target is $241.88, with a high forecast of $275 and a low forecast of $200. The average price target represents a +25.4% change from the last price of $192.95. (from TipRanks)
  • Dividend Yield: No incoming dividends
  • Technical Sentiment (based on Technical Indicators and Moving Averages):
    • Investing.com = Daily (BUY) and Weekly (SELL)
    • TipRanks = Daily (SELL) and Weekly (SELL)

Value Line Guidance:

  • Company Financial Strength Rating: B
  • Share Price Safety, Market Timing, Technical Rank: 1=best. 5=worst
  • Share Price Safety:       3 of 5               
  • Market Timing:             3 of 5               
  • Technical Rank:            3 of 5               
  • Beta:                                  1.70                
  • Stock’s Price Stability:             20/100             
  • Price Growth Persistence:      50/100             
  • Earnings Predictability:          15/100             
  • Average Annual PE:                                                                           NMF                            
  • Average Annual Sales Growth in the past 5 years:                -7.5%  
  • Average Annual Sales Growth for the next 5 years:             +10.5%           
  • Average Annual Cash Flow Growth in the past 5 years:     NMF   
  • Average Annual Cash Flow Growth for the next 5 years:   NMF   
  • Average Annual Earnings Growth in the past 5 years:       NMF   
  • Average Annual Earnings Growth for the next 5 years:    NMF   
  • Average Annual Dividend Growth in the past 5 years:      -25.5%
  • Average Annual Dividend Growth for the next 5 years:   +28.0%           
  • Average Annual Dividend Yield 3 to 5 years:                        +0.7% 

Financial Performance

  • 10-year Average Annual Total Return: +5.59% (through Nov 3, 2023)
  • EPS
    • 2020: -d$20.88
    • 2021: -d$7.15
    • 2022: -d$8.30
    • 2023: e-d$1.00
    • 2024:  e$5.75  (from Value Line Quarterly Report)
  • Average Annual PE: NMF (VL Quarterly Report)
  • PEG Ratio: NMF (FinViz)
  • Beta: 1.48 (FinViz)

Quarterly Reports Summaries (including Revenue, Cash Flow, Earnings):

3Q2023 (September): Reported October 25, 2023

  • Boeing reaffirmed guidance for operating cash flow and free cash flow.
  • Expected deliveries include 70-80 787 airplanes and 375-400 737 airplanes.
  • Production transition plans for 787 and 737.
  • Recorded revenue of $18.1 billion, reflecting 105 commercial deliveries.
  • Total company backlog stands at $469 billion, including over 5,100 commercial airplanes.
  • Financial results showed a 13% increase in revenues and improvements in operating cash flow and net loss.

2Q2023  (June):

  • Boeing is making progress in increasing plane production and deliveries.
  • The 737 narrow-body program is producing 38 units per month, and widebody 787 operations are building up.
  • Boeing expects to deliver around 400-450 planes this year and aims to increase production rates.
  • Challenges are faced in the military business, but it continues to win new business and maintains a solid backlog.
  • Aircraft support operations in the Global Services division contribute to positive financial results.

1Q2023 (March):

  • Boeing is working to increase airplane production despite challenges.
  • They aim to produce 400-450 single-aisle 737 planes this year and increase production rates.
  • The production of the 787 wide-body model is expected to improve.
  • Boeing has a substantial backlog of 4,500 planes worth $334 billion.
  • Challenges in the Defense, Space & Security division are noted, but positive orders are received.

4Q2022 (December):

  • Boeing’s Airplanes segment is working to increase production to meet strong demand.
  • They are awaiting federal approval for enhanced cockpits on certain configurations of the 737.
  • The production of the 787 Dreamliner is expected to improve.
  • Engine supply problems are gradually being resolved.
  • The Defense, Space & Security division faced challenges in the past but is making progress.
  • Global Services is experiencing steady growth in revenues and operating income.

The 3-to-5-year Operational and Financial Outlook:

  • The 3-to-5-year outlook indicates a return to growth in revenue and earnings, starting as early as 1Q2024.

Company SWOT Analysis

Internal Strategic Factors:

Strengths:

  1. Strong Brand and Market Position: Boeing is globally recognized for quality and innovation, attracting a diverse customer base.
  2. Diverse Product and Service Portfolio: Boeing offers a wide range of products, including commercial and military aircraft, reducing dependence on a single product line.
  3. Strong Market Share: Despite being the second-largest aerospace company, Boeing’s size provides economies of scale and industry influence.
  4. High Innovation: Boeing is known for pioneering innovations in the industry, setting standards in areas like lightweight composites and fuel efficiency.
  5. Widest Variety: Boeing serves diverse customer needs, from commercial airlines to personal jets.
  6. Strong Relationships: Boeing maintains meaningful relationships with suppliers and partners, recognizing their contributions.
  7. Strategic Partnerships: Collaborations with technological powerhouses enhance Boeing’s capabilities.
  8. Robust Supply Chain: Boeing relies on a strong supply chain for timely component delivery.
  9. Business Model Resilience: Boeing demonstrates resilience by responding flexibly to market changes, as seen during the pandemic.
  10. Efficient and Economical Models: Plans for launching more cost-effective aircraft models.
  11. Sustainable Innovation: Boeing’s focus on sustainable innovation as a core business strategy.
  12. Employer Brand: Boeing’s strong employer brand is reflected in its ranking on Forbes’s Best Employer list.
  13. Less Noisy Aircraft: Quieter aircraft models like the 737 and 777x provide a competitive edge.
  14. Strong Geographic Presence: Boeing’s go-to-market strategies have expanded operations to over 150 countries.

Weaknesses:

  1. Financial Performance: Boeing reported a net loss despite increased revenues, indicating challenges in cost management and profitability.
  2. Supply Chain Disruptions: Ongoing supply chain disruptions and labor instability adversely impact financial position and cash flows.
  3. Flawed and Unsafe Design: Boeing’s flawed 737 Max design is a significant weakness following the 2019 crashes.
  4. Over-Outsourcing: Heavy reliance on outsourcing led to layoffs at key suppliers, affecting 737 Max production.
  5. Overdependence on US Contracts: Boeing’s reliance on US government contracts makes it vulnerable to US politics and economic factors.
  6. Supply Chain Issues: Management strategies lead to supply chain challenges impacting operations.
  7. Poor Labor Management: Ineffective labor management practices, like firing employees who form a union, are evident.
  8. Declining Revenue: Intensifying competition resulted in declining revenue over the years.
  9. Losing Market Share: Boeing trails Airbus in new orders and deliveries.
  10. Declining R&D Expenditure: Reduced R&D spending resulted in costly product development decisions like the 737 Max failure.
  11. Safety Issues: Concerns about the safety of Boeing’s aircraft have been raised.
  12. Extreme Appetite for Outsourcing: Excessive outsourcing led to cost overruns and delays.
  13. Extreme Reliance on US Government: Boeing heavily depends on US government contracts for defense and security revenue.

External Strategic Factors:

Opportunities:

  1. Market Recovery: Boeing can benefit from the rebound in demand for air travel as the global economy recovers from the pandemic.
  2. Technological Advancements: Investment in technologies like AI, autonomous systems, and sustainable aviation can lead to innovative products and services.
  3. Focus on the Space Force: Boeing can pursue opportunities with the US Space Force.
  4. Increasing Demand for Satellites: Boeing is well-positioned to meet the growing demand for satellite technologies.
  5. Military Drones: The Russia-Ukraine war has permanently changed the importance of unmanned vehicles.
  6. Electric Planes: Developing passenger vehicles and air taxis and serving smart cities’ transportation needs.
  7. Eco-Friendly Planes: Committing to reducing the carbon footprint through advanced technologies.
  8. Growing Space Market: Partnering to tap into the expanding space market.
  9. Rising Demand for Satellite Technology: Expanding presence in the satellite market.
  10. Growing Electric Aircraft Market: Capitalizing on the growth of electric planes.
  11. Demand for Economical, Midsized Planes: Meeting the increasing demand for fuel-efficient mid-sized planes.

Threats:

  1. Regulatory Risks: Non-compliance with safety and environmental regulations could lead to penalties and reputational damage.
  2. Competitive Pressure: Intense competition with major players like Airbus affects pricing, market share, and profitability.
  3. Public Perception: Safety concerns can permanently affect public perception, making it challenging to regain trust.
  4. The Pandemic: Air travel impact from bankruptcies among airlines and order cancellations.
  5. Looming Recession: Economic downturns may reduce air travel demand.
  6. Terrorist Attacks: Threats of terrorist attacks affecting air travel.
  7. Trade War: Trade disputes affecting access to the European market.
  8. Cybersecurity Threats: Cyber-attacks pose a major threat to Boeing’s security systems.
  9. Intensifying Competition: Competition from Airbus with strong EU support.
  10. Growing Safety Concerns: Increasing fatal accidents raise passenger concerns.
  11. Rising Oil Prices: Higher oil prices reduce aircraft demand.
  12. Economic Recession: Reduced air travel demand due to economic downturns.

FinViz Snapshot:  https://finviz.com/screener.ashx?v=171&t=BA

10-year Historical Price Chart:

 

 

Point & Figure Chart:

https://stockcharts.com/freecharts/pnf.php?c=BA,PWTAWANRNO[PA][D][F1!3!!!2!20]

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