Boeing Almost Off the Ground, Awaiting Chinese Recertification

The last two years have been a rollercoaster for the capital markets, and no less so for The Boeing Company (BA). The aircraft and defense manufacturer with a $126.65 billion market cap has been attempting to climb back to its pre-pandemic valuation, its upward path disrupted by persisting COVID-19 variants and its ongoing 737 MAX saga. Despite these setbacks, analysts have largely remained bullish.  

One of those optimistic on Boeing’s outlook is Sheila Kahyaoglu of Jefferies Group, who wrote that delivery results have been ramping up steadily over the last year. The company is set to report on its Q4 deliveries and total 2021 performances tomorrow, January 11. Beyond that milestone, according to TipRanks; earnings calendar, Boeing is expected to report quarterly earnings on January 26 before market open.  

Kahyaoglu certified her confidence on the stock by rating it as a Buy, and assigning a price target of $300. This target currently represents a possible 12-month upside of 39.21%.  

Boeing vs. China

The analyst elaborated that thus far, deliveries are up “sharply” from the same quarter last year. She is expecting BA to report 337 total deliveries for 2021, and is projecting 621 of them for 2022. Meanwhile, the ramp back up for the 737 story hinges on a single linchpin for Boeing: Chinese recertification.  

After a series of crashes and malfunctions throughout 2018 and 2019, the new Boeing 737 MAX aircraft was grounded worldwide for months, and even years in certain locations. As much of the world has since recertified it, China remains a large outlier.  

In 2021, North America made up 43% of deliveries of the newly improved aircraft, and Europe 35%. While Asia itself makes up about 40% of Boeing’s delivery backlog, the region only made up 8% of 2021’s delivery numbers.  

A change in this disproportionate dissonance in delivery-to-backlog amounts for Asia is largely dependent on Chinese regulatory approval. This issue with this key catalyst is it may come at any moment, or not at all. The populous East Asian nation makes up about 20% of Boeing’s entire 737 backlog.  

Although 2021’s airline recovery has been set back by several COVID-19 variants and a multitude of government-mandated lockdowns and border closures, Boeing is still expected to report solid delivery results tomorrow. As far as a long-term investment goes, it will hinge not just on the virus, but something far more complicated and unpredictable, the Chinese government.  

Wall Street Weighs In

On TipRanks, BA has an analyst rating consensus of Strong Buy, based on 13 Buy and 3 Hold ratings. The average Boeing Company price target is $269.07, suggesting a possible 12-month upside of 24.86%. BA closed trading Friday at a price of $215.50 per share.

Disclosure: At the time of publication, Brock Ladenheim did not have a position in any of the securities mentioned in this article.