Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Boeing Q1 Earnings May Not Offer Relief But Long-Term View Remains Rosy

By Investing.com (Haris Anwar/Investing.com)ETFsApr 17, 2019 10:02
uk.investing.com/analysis/boeing-q1-earnings-may-not-offer-relief-but-longterm-view-remains-rosy-200207462
Boeing Q1 Earnings May Not Offer Relief But Long-Term View Remains Rosy
By Investing.com (Haris Anwar/Investing.com)   |  Apr 17, 2019 10:02
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

* Reports Wednesday, April 24, before the open
* Revenue Expectation: $23.08B
* EPS: $3.25

Boeing Co. (NYSE:BA) is still reeling from one of the worst crises in its corporate history after two fatal crashes involving its best-selling plane. But the American aviation giant will get another chance next week to calm wary investors when it releases first-quarter earnings on Wednesday, April 24.

Shareholders will want to know what impact the world-wide grounding of its 737 MAX jetliner has had on the company's earnings momentum and long-term growth plans after the two deadly crashes within five months forced the company to cut its 737 production by 19% and form a committee to review the design and development of its aircraft.

The stakes are high for both Boeing and for the U.S. economy. The 737, which first entered service in the late 1960s, is the aviation industry’s best-selling model and Boeing’s top earner. The re-engineered MAX version was so successful it attracted over 5,000 orders worth more than $600 billion, including planes that have already been delivered, according to Bloomberg data.

Deposits from 737 MAX orders helped boost Boeing’s revenue above $100 billion for the first time last year. That drove the Chicago-based company’s market cap to over $250 billion before the Ethiopian Airlines crash last month, the second after October’s fatal incident that also involved the 737 MAX, operated by Indonesia’s Lion Air.

The 737 MAX is Boeing's largest contributor of product revenue and earnings before interest and taxes (EBIT), according to Goldman Sachs estimates, with the potential to make up 45% of Boeing’s EBIT over the next five years.

According to Credit Suisse, a combination of negative developments may hurt Boeing’s cash flows by $3.7 billion this year, or about a quarter of the cash flow forecast by the bank.

No Swift Return to Normality

One of the most important questions that Boeing executives will need to answer at the conference call is how long it will take for the company to return to its normal operating capacity. The answer, however, depends upon the conclusion of multiple inquiries in various jurisdictions, Boeing’s ability to quickly release the software fix, and the lifting of a global ban on 737 MAX.

In our view, a swift return to normal operations looks highly unlikely. Boeing engineers are still finishing work on a software update for a stall-prevention system linked to both the Lion Air and the Ethiopian Airlines disasters. However, one silver lining for Boeing stock and its investors is that the company has averted a worst-case scenario in which there were different causes for each of the two crashes, with the engineers still struggling to find the technical solution.

Still, we don’t see Boeing stock regaining its lost ground in 2019 as disruptions to its 737 MAX deliveries are ongoing and investors won’t get much clarity even in the upcoming earnings call. Boeing shares have fallen almost 10% since the Ethiopian Airlines crash on March 10, closing yesterday's session at $381.72.

Boeing Weekly Chart
Boeing Weekly Chart

With the build-up in inventories and production cuts, Boeing will this year also have to deal with the complexities of penalties owed to customers, negotiations with regulators and airlines and managing its cash flows. All of this means lower margins and lost opportunities in the short-run.

Bottom Line

Despite this dismal outlook and the headline risk in the short-run, we strongly believe that Boeing stock will recover from this crisis. Airlines have no alternative but to pick one from the Boeing-Airbus (PA:AIR) plane-maker duopoly. This bearish spell also offers an opportunity for long-term investors to take advantage of Boeing's share weakness and consider adding this excellent dividend stock, which currently yields 2.19%, to their portfolios.

Boeing Q1 Earnings May Not Offer Relief But Long-Term View Remains Rosy
 

Related Articles

Boeing Q1 Earnings May Not Offer Relief But Long-Term View Remains Rosy

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email