On Tuesday, analysts at Argus downgraded shares of Boeing (NYSE:BA) to a Hold rating, a change from their previous Buy stance. The adjustment comes as Boeing's stock has shown a notable underperformance compared to the broader market in the recent quarter, with a 16% decline while the S&P 500 index has gained 5%.
The firm stated: "We have long viewed Boeing as a Special Situation, but, absent a CEO, the turnaround opportunity is now multiple quarters in the future."
The aerospace giant has experienced a significant 35% drop in its share price since the start of the year. This descent is attributed to fresh complications with its MAX aircraft, which have precipitated a change in the company's leadership, including the replacement of the chairman and the forthcoming early retirement of the CEO.
Boeing's financial health has been impacted, with the company disclosing a first-quarter revenue decrease of 8% and another operating loss. The absence of a CEO has pushed the potential turnaround for the company several quarters into the future, according to analysts at Argus.
Boeing, recognized as one of the major aerospace and defense firms, is believed to have strong long-term prospects due to its dominant position in the expanding commercial aerospace sector. Additionally, its Defense segment, a top-5 contractor for the Pentagon, usually contributes to profitability. Despite these advantages, Boeing is currently grappling with a variety of challenges, both external, such as inflation and supply chain issues, and internal, including serious aircraft problems. Notably, a recent incident involved a door plug detaching from a Boeing jet mid-flight.
Analysts at Argus said the stock is fairly valued at the current price of around $173 per share, which is below the midpoint of the 52-week range between $159 and $267. The firm doesn't have a price target on the stock. Argus explains that valuation models, which include peer and historical multiple comparisons and a dividend discount approach, now appear distorted due to Boeing's suspended dividend, recent financial losses, and lowered earnings forecasts.
Given the current uncertainties surrounding Boeing's future earnings and cash flow growth, analysts at Argus recommend a Hold rating for the company's stock, notwithstanding Boeing's significant role in the U.S. economy and its substantial backlog of orders.