Boeing – Fountainheadinvesting

Boeing (BA) (Aerospace)$175 – Hold for now, signs of improvement suggest buying on declines but do expect some near-term volatility in the stock prices.

Despite challenges, Boeing is showing signs of improvement in order inflow and production rates for the Boeing 737 MAX, shaping up for a promising balance of the year.

The problems on the Starliner – space exploration was very expensive, painful and a huge burden, which is still continuing. Boeing’s space adventure might be close to over regarding transportation of payloads and crews into space.

Kelly Ortberg, like any CEO, has to prove himself worthy of the CEO position of The Boeing Company. It would be unrealistic to expect that with Ortberg now in the CEO role, things will change overnight.

However, I do believe without focusing on the financials and granted that the FAA and Boeing remain focused on safety and quality, the airplane orders and deliveries will tell a story about how Boeing is progressing on its core principles. The orders tell a story about confidence in Boeing, while deliveries tell a story about the ability of Boeing to increase production at the quality standard that is required and desired.

Boeing (BA) $208

Boeing (BA) has been a chronic underperformer – its last 10-year total return is just 63% – that’s 5% a year, despite being a duopoly, quality issues have constantly dogged its performance.

That said – Boeing will likely recover about 15-20% from this price. It has done that several times in the past and is currently working with regulators fixing its quality problems with the Boeing 737 Max 9, which suffered the explosive decompression accident in January and has been grounded till quality issues are sorted out.

Besides, it’s a duopoly with $125Bn worth of order inflows – demand is solid, customers have nowhere else to go, and they have a lot of deliveries planned for 2024.

However, this is at best, a mediocre cyclical long-term investment, you have to constantly look over your shoulder for quality and delivery issues. Even in 2023, they fell 10% short of delivery performance, due to quality issues at Spirit AeroSystems, one of their key suppliers.

Boeing has not given guidance for 2024 – they should not, as an investor I would prefer that they focus on solving their safety problems first instead of rushing through. And as Dhierin Bechai one of the better Boeing and Aerospace analysts at Seeking Alpha, said

“It is widely considered that the problems at Boeing originate from a financially focused mindset where the focus is on financial numbers rather than engineering and manufacturing strength.”