Boeing - a return to the heights?
Boeing has long been the showcase of American industry. It was one of the largest suppliers to the US military and the largest aircraft manufacturer in the world. However, several tragic accidents and a COVID pandemic brought Boeing's shares to their knees and the market even feared at times whether the company would go bankrupt. However, more than three years have passed since then and Boeing seems to be on the right track.
This was indicated by the results for the second quarter of this year. Revenues came in above estimates (USD 19.75 billion vs. USD 18.45 billion) and investors were especially pleased with free cash flow, which was well above estimates at USD 2.58 billion. The market was expecting negative USD 74 million. USD. Boeing also reaffirmed its full-year free cash flow guidance. Despite this, the company again ended the quarter in the red, with a loss of 82 cents per share. However, the market was expecting an even deeper loss of 88 cents per share. Surprisingly, the defense, space & security section also ended in a loss.
Boeing shares on the MT4 platform on the H4 timeframe
However, investors reacted very positively to the results and the stock gained 9% in one day. Since the beginning of the year, Boeing is up more than 21%, outperforming the S&P 500. Boeing was one of the companies most affected by supply chain problems, but fortunately these are now gradually disappearing. The company's production is now stable, with 136 aircraft delivered in the quarter, 15 more than a year ago. Production of the best-selling Max has managed to increase from 31 to 38 aircraft per month. Boeing should deliver between 400 and 450 737s this year. The company should deliver around 80 787 Dreamliners this year. Deliveries of the smallest 737, the Max 7, should then begin next year, slightly later than originally expected.
Boeing is therefore still enjoying strong demand and the improving financial situation could extend the current rally. By the 2025/2026 period, Boeing expects revenues to be around $100 billion per year again, a level the company has only surpassed once before - in 2018, before all the aforementioned problems. Margins should reach 10%, so operating profit could be around $10 billion. While the given target is bold, the company could achieve it.
However, a return of the stock to its original levels (around $450) is certainly not guaranteed. While Boeing is reducing its debt, its debt is still $40 billion higher than 5 years ago. All indications are that free cash flow in the coming period will go mainly to debt reduction. Investors therefore cannot count too much on dividends or share buybacks. This means that, at least in the medium term, Boeing shares will be favoured mainly by speculators.