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Boeing plane taking off - Boeing's stock outlook

Apr 22, 2022

Can Boeing (BA) Stock Price Take Off After Earnings?

By:Ryan Sullivan

Late 2019 through early 2020 was a rough period for the Boeing Company (BA) due in large part to travel restrictions put in place because of the Covid-19 pandemic. The aerospace industry was hit hard and valuations across the board fell severely. Boeing posted its all-time high of $446.01 on February 25th, 2019, and is currently trading at $178.55 this morning. That is a 59.97% drop in 1,148 days (about 3 years). Boeing is scheduled to release quarterly earnings on April 27th, 2022, before the opening bell.

How Does Boeing Compare to Its Competitors?

Boeing is the largest aerospace company in the world and the foremost manufacturer of commercial jet aircraft and defense, space systems. Boeing’s largest competitors include General Dynamics Corp (GD), Northrup Gruman Corp (NOC), and Lockheed Martin Corp (LMT). Of the four companies, Boeing has fared the worst over the last 12 months of trading.

Fig. 1: 12-Month Price Percent Change for NOC, GD, LMT, and BA

In the last three months, we have seen the aerospace industry begin to recover, however, Boeing (BA) has continued its downward trend. Even though Boeing is a leading innovator in commercial and military aircraft, defense systems, satellite manufacturing, and communication systems, their business has suffered in ways that are unique compared to its competitors. Boeing's commercial aircraft manufacturing wing has taken a huge hit since pandemic-related travel restrictions were implemented and the world’s demand for air travel came to a crawl.

With decreasing demand for commercial travel by jetliner in early 2020, orders for Boeing’s commercial jet aircraft plummeted and hurt Boeing's revenue stream related to commercial aircraft sales. Since General Dynamics Corp (GD), Northrup Gruman Corp (NOC), and Lockheed Martin Corp (LMT) do not compete on the same level as Boeing in commercial aircraft sales, they have been able to better navigate the reduction in demand for commercial aircraft. This gives us some insight into one potential reason Boeing’s valuation has remained in a downward trend while its competitors have recovered the year.

Key takeaways:

  • Boeing competes in many aerospace sectors in addition to commercial aircraft manufacturing.
  • Covid-19 pandemic travel restrictions have uniquely affected Boeing’s (BA) revenue stream.
  • Boeing has remained in a downtrend over the last 12 months while its competitors have recovered.

How Do Boeing’s (BA) Financials Look?

The last five quarters have shown that Boeing’s sales remain consistent, rising slightly and then falling slightly to remain just below what they reported five quarters ago. Five quarters ago, in March 2021, Boeing reported a negative net income of a little more than $8 Billion, followed by three quarters of almost zero net income. Last quarter, Boeing again reported a larger negative net income of a little more than $4 Billion. Over the last five quarters, Boeing has decreased their overall liabilities and assets, posting its largest reduction in the last earnings cycle by reducing their liabilities and assets by about 5% compared to December 2021.

Boeing (BA) reporting stagnate sales and zero to negative net income over the last 12 months gives us insight as to why the value of Boeing’s stock price continues to fall. At the same time, Boeing’s competitors have been able to maintain a positive net income over the same period and as a result, we have seen their stock price valuation rise. Boeing’s recent move to reduce liabilities and assets allows us to understand that Boeing is trying to reduce their cost of doing business by trimming unnecessary costs to attempt to be more profitable.

Key takeaways:

  • Boeing’s financials have not been as strong as its competitors over the last five quarters.
  • Boeing has reduced its total liabilities and assets over the last five quarters.

How Should I Trade Boeing’s (BA) Earnings Next Week?

Boeing’s (BA) large negative net income report from last quarter concerns investors. Investors would have rather seen Boeing’s net income remain near zero rather than drop sharply into the negative. It is a marginally decent sign that Boeing’s sales have remained where they were about a year ago, not falling off too drastically while weathering the pandemic-related travel restrictions. Boeing’s move to reduce its cost basis by reducing total liabilities and assets is a positive for investors as this could lead to increased net income.

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Boeing’s (BA) current stock price valuation presents an opportunity to investors who believe that Boeing will remain the leading aerospace commercial aircraft and defense systems manufacturer in the future. Since Boeing continues to win commercial and military contracts to produce aircraft and defense systems, it is unlikely that Boeing will see sharp decreases in stock price, such as the fall in price we saw in late 2019 and early 2020. If Boeing reports nominal advances in sales and net income next week from what was reported last quarter, we will likely see Boeing’s stock price sideways as investors wait for indications of positive future performance. If we see Boeing report a significant increase in sales and a nice jump in net income, we could see Boeing's stock price post significant gains as it moves in a direction comparable to its competitors.

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