Update to the Boeing (BA) QUARTERLY MAVERICK REPORT, dated December 24, 2023

January 8, 2024

On January 7, Alaska Airlines, flying a Boeing 737 Max 9, suffered a mid-flight blowout of a door panel while climbing to 16,000. Consequently, the US regulator has grounded all such planes pending investigation. Other regulators are sure to follow.

With Wall Street analysts having issued 18 Buy, 3 Hold, and zero Sell recommendations, it’s unsurprising that while investors smashed the stock almost -10% at the opening, Wall Street stood collectively in defiance. That’s what self-interested networks do. Their reaction is to save themselves. It’s never about the impacted investor.

https://finance.yahoo.com/news/this-accident-does-not-alter-our-positive-view-on-boeing-wall-street-reacts-to-boeings-plunge-after-faa-grounds-737-max-jets-135540259.html

The Boeing 737 Max has always been controversial. Per Wikipedia:

The Boeing 737 MAX passenger airliner was grounded worldwide between March 2019 and December 2020 – longer in many jurisdictions – after 346 people died in two similar crashes: Lion Air Flight 610 on October 29, 2018 and Ethiopian Airlines Flight 302 on March 10, 2019. The U.S. Federal Aviation Administration (FAA) resisted grounding the aircraft until March 13, 2019, when it received evidence of accident similarities. By then, 51 other regulators had already grounded the plane,^[3] and by March 18, 2019, all 387 of the aircraft in service were grounded.

I refer you to my last Boeing report for the Maverick Investor Program, dated December 24, 2023.

I issued a short-term, high-risk buy in mid-December for investors interested in Boeing. For long-term-oriented investors, I advised them to wait for the Weekly RSI-7 data to dip below 30 before buying, and it was at the time of the Dec. 24 report at a very high (Distribution zone) 70.7. But for Maverick Investors in my program, this was the guidance:

While there are signs of improvement in cash flow and certain growth metrics, challenges in profitability and high valuation multiples require caution. Long-term investors should monitor the company’s efforts to improve operational efficiency and address its financial leverage.
2024 might be a turnaround story. However, many years of consecutive losses continue. Until we see hard evidence, Boeing has no place in any Maverick portfolio. Excessive volatility is the key issue.

So, there you have more proof that independent investors are often led astray by Wall Street, which is precisely why I have the Maverick program.

My report:

Boeing Co. (BA) QUARTERLY MAVERICK REPORT

December 24, 2023, $260.44

Boeing Business Description:

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.

BA Maverick Guidance:

Short-term recommendation: 20231215: CAUTIOUS BUY. Long Tail Up, mid-Dec (Extended)
Long-term stock recommendation: IF INVESTED, BUY WHEN BA DROPS TO ACCUMULATION ZONE as cash flow issues are being quickly resolved.
Boeing has worked for the past year to increase production and address improvements in financial results and backlogs.
While there are signs of improvement in cash flow and certain growth metrics, challenges in profitability and high valuation multiples require caution. Long-term investors should monitor the company’s efforts to improve operational efficiency and address its financial leverage.
2024 might be a turnaround story. However, many years of consecutive losses continue. Until we see hard evidence, Boeing has no place in any Maverick portfolio. Excessive volatility is the key issue.

BA Consideration for Maverick Portfolio:

X = Not appropriate in any portfolio for Maverick investors.

BA Market Guidance: NOTE FREQUENT CHANGES

Analyst Ratings— MarketBeat = MODERATE BUY, TipRanks = STRONG BUY
Consensus: 21 Wall Street analysts have offered 12-month price targets in the last 3 months. There are 18 Buy, 3 Hold, and zero Sell.

Based on 21 Wall Street analysts offering 12-month price targets in the last 3 months, the average price target is $276.05, with a high forecast of $320 and a low forecast of $217. The average price target represents a +6.0% change from the last price of $260.44.

Dividend Yield: No incoming dividends
Technical Sentiment (based on Indicators and Moving Averages):
- Investing.com = Daily (STRONG BUY) Weekly (STRONG BUY)
- TipRanks = Daily (BUY) Weekly (BUY)

BA Value Line Guidance:

Company Financial Strength Rating: B
Share Price Safety: 3 of 5
Market Timing: 3 of 5
Technical Rank: 3 of 5
Stock’s Price Stability: 20/100
Price Growth Persistence: 40/100
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: +0.8%

BA Financial Performance:

EPS:
- 2020: -d$20.88
- 2021: -d$7.15
- 2022: -d$8.30
- 2023: e-d$4.40
- 2024: e$5.00
PE:
- Current PE: NEG
- Forward PE: 57.1
- PEG Ratio: NMF
10-Year AATR:
- Start date: 12/27/2013 End date: 12/26/2023
- Start price/share: $136.90 End price/share: $262.79
- Starting shares: 73.05 Ending shares: 85.52
- Dividends reinvested/share: $33.72
- Total Return: 102.81% Average Annual TR: 8.43%
- Starting: $10,000.00 Ending investment: $22,469.37

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

3Q2023 (September):

Financial results showed a 13% increase in revenues and improvements in operating cash flow and net loss.
Reaffirmed guidance for operating cash flow and free cash flow.
Expect to deliver 70-80 787 airplanes and 375-400 737 airplanes.
Revenue is $18.1 billion, reflecting 105 commercial deliveries.
The total backlog is $469 billion, incl. 5,100+ commercial airplanes.

2Q2023 (June):

Making progress in increasing plane production and deliveries.
The 737 narrow-body program produces 38 monthly units, 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.

BA 3-to-5-year Value Line Operational and Financial Outlook:

The 3-to-5-year outlook indicates a return to growth in revenue and earnings.

BA Noteworthy Strategic Developments:

On Dec. 11, Stephanie Pope was appointed Executive Vice President and Chief Operating Officer. Pope will report directly to Dave Calhoun, CEO.

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

BA Company SWOT Analysis

Internal Strengths:

Strong Brand and Market Position: Boeing is globally recognized in 150 countries for quality and innovation, attracting diverse customers..
Diverse Product and Service Portfolio: Boeing offers a wide range of products, including commercial and military aircraft, reducing dependence on a single product line.
Strong Market Share: Second-largest aerospace company. Boeing’s size provides economies of scale and industry influence.
High Innovation: Boeing is known for pioneering innovations like standards in lightweight composites and fuel efficiency.
Strong Relationships: Boeing maintains meaningful relationships with suppliers and partners, recognizing their contributions.
Business Model Resilience: Boeing demonstrates resilience by responding flexibly to market changes, as seen during the pandemic.
Employer Brand: Boeing’s strong employer brand is reflected in its ranking on Forbes’s Best Employer list.

Internal Weaknesses:

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

External Opportunities:

Market Recovery: Boeing can benefit from the rebound in demand for air travel as the global economy recovers from the pandemic.
Technological Advancements: Investment in technologies like AI, autonomous systems, and sustainable aviation can lead to innovative products and services.
Military Drones: The Russia-Ukraine war has permanently changed the importance of crewless vehicles.
Eco-Friendly Planes: Committing to reducing the carbon footprint through advanced technologies.
Growing Space Market: Expanding space market and US Space Force.
Rising Demand for Satellite Technology: Expanding satellite market.
Growing Electric Aircraft Market: Growth of electric planes.

External Threats:

Regulatory Risks: Non-compliance with safety and environmental regulations could lead to penalties and reputational damage.
Competitive Pressure: Intense competition with major players like Airbus affects pricing, market share, and profitability.
Public Perception: Safety concerns can permanently affect public perception, making it challenging to regain trust.
Looming Recession: Economic downturns may reduce air travel.
Terrorist Attacks: Threats of terrorist attacks affecting air travel.
Trade War: Trade disputes affecting access to the European market.

Short-term Price Chart: https://stockcharts.com/h-sc/ui?s=BA

Point & Figure Chart: https://stockcharts.com/freecharts/pnf.php?c=BA,P