🚀 AI-picked stocks soar in May. PRFT is +55%—in just 16 days! Don’t miss June’s top picks.Unlock full list

Boeing vs. Airbus Stock: Which One Is a Safer Hold for the Long-Term

Published 20/03/2024, 19:15
BA
-
EADSF
-
EADSY
-

Since the beginning of the year, Boeing (NYSE: NYSE:BA) has achieved a meme stock status, but not in a good way. Due to publicly highlighted grounding incidences of its commercial aircraft, BA shares have plummeted 26% year-to-date.

At the same time, Airbus SE (OTC:EADSY) (OTC:EADSF) is on a divergent upward trajectory, gaining 19% returns. The purported suicide of Boeing whistleblower Josh Barnett in the middle of a deposition further complicates Boeing’s standing.

With Barnett’s suspicious death, his allegations of the company’s negligent practices came to the public spotlight following his departure in 2017. Barnett had previously tracked the source of Boeing’s quality issues to the merger with McDonnell Douglas in 1997:

“Their motto [McDonnell Douglas] was, we’re in Charleston and we can do anything we want. They started pressuring us not to document defects, to work outside procedures, to allow defective material to be installed without being corrected.”

Josh Barnett in the Corporate Crime Reporter interview

However, from an investing standpoint, does it make sense to exploit the buy-on-the-weakness opportunity or dip into Airbus for long-term gains?

Does Boeing’s Corporate Culture Stand Out?

At the bottom line, the company’s outlook relies on its human capital management. It is no secret that Boeing, like other large American companies, was built by people of European descent. From its founding in 1916, the company became a multinational corporation employing 156,000 personnel across 47 nationalities.

During this expansion, Boeing began to erode its human capital actively. In the 2023 annual Global Equity, Diversity & Inclusion (GEDI) report, the company recorded the racial/gender makeup of its employees. White employees were the only group to take a hit in representation in favor of other racial groups.

Boeing’s fixation on employee characteristics other than competency was greatly disapproved across social media. Just one such critical view had received nearly three million views.

In other words, Boeing is on a “journey to disrupt bias, racism and discrimination” instead of a journey of quality assurance. Nonetheless, its European competitor Airbus took the same DEI pledge by claiming “there is power in being different.”

Does Boeing or Airbus Have a Superior Safety Record?

Notwithstanding social engineering pledges, which part of the aircraft duopoly outperforms in the safety department? According to Boeing’s own report, tracking accident rates between 1959 and 2022, Airbus is the clear winner with a lower hull loss accident rate (per one million departures) per aircraft model.

Airbus’ safety performance is further amplified by having nearly double the aircraft deliveries than Boeing, at 611 vs. 340 respectively in 2021, per Statista data. This means that Airbus has superior scaling operations.

Furthermore, while Boeing grounded aircraft multiple times amid Federal Aviation Administration probes in 2024, Airbus had reported the lowest fatal accident rate on record with its generation 4 aircraft. Nonetheless, both companies have reported drastic declines in accident rates over the decades.

Which Aircraft Company Is More Profitable?

In the Q4 2023 earnings release, Boeing reported a 17% year-over-year revenue increase to $77.8 billion for the full year. Likewise, Boeing’s free cash flow increased significantly by 91%, from $2.3 billion in 2022 to $4.4 billion in 2023. The company generated a net loss of $2.2 billion, nearly halving the net loss of $5 billion the year prior.

For the full-year 2023, Airbus reported $84 billion revenue, a YoY increase of 11% (+4% for defense contracts), and a $4.1 billion net income, which is a YoY decline of 11%. Although Airbus reported free cash flow in the same range as Boeing, at $4.2 billion, this is a 10% YoY decline as well.

These figures place Airbus in expansion mode while Boeing still struggles to cut losses.

Verdict: Airbus or Boeing for Long-Term Exposure?

Although the Josh Barnett situation could suppress BA stock further down the line, investors should remember that Boeing is a military contractor in addition to a commercial aircraft supplier.

In 2023, Boeing increased its defense, space & security revenue by 8% to $24.9 billion. This yielded a $1.7 billion loss from operations, in addition to cutting in half the company’s operating margin from 15.3% in 2022 to 7.1%. Once again, this shows that Boeing struggles with cost-efficiency.

That said, Boeing remains a vital cog of the US military machine. In addition to its supply chain and logistics network, this makes the company as wide a moat as it can be. It also tells us that the EU had zero political response to the historic Nord Stream pipeline sabotage.

Conversely, this positions the continent firmly under the USG sphere, which will likely translate into more lucrative contracts to restock EU militaries.

Counterintuitively, Boeing could be a better investment exposure in the long run, as there is greater height from the bottom. Twelve months ahead, 22 analysts polled by Nasdaq view BA’s average price target at $261.28 vs. the current $185 per share.

***

Disclaimer: Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.

This article was originally published on The Tokenist. Check out The Tokenist’s free newsletter, Five Minute Finance, for weekly analysis of the biggest trends in finance and technology.

Latest comments

Loading next article…
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.