Why Did Boeing Drop to an All-Year Low?

Shares of American airplane manufacturer Boeing Company (BA) crashed to a new all-year low of $146, after it missed first-quarter expectations. The aircraft manufacturer’s results were impacted by a series of charges recorded on its fixed-price defense development programs and from the war in Ukraine, resulting in a quarterly loss of $1.2 billion.

After undergoing a rough ride, BA stock finally landed in the red, down 7.5% at $154.46 on April 27. Year to date, its stock is down 25.7%.

Boeing’s Dismal Q1 Results

Boeing’s Q1 revenues fell 8% year-over-year to $13.99 billion and missed analysts’ estimates of $15.83 billion. The poor revenue growth was driven by a combination of lower defense volume and higher commercial services volume.

Similarly, the Q1 adjusted loss of $2.75 per share came in significantly below the analyst estimated loss of $0.12 per share. The figure was even higher than the Q1FY21 adjusted loss of $1.53 per share.

The company took a $212 million hit in pre-tax charges related to the Ukraine war. Additionally, a $312 million charge from 787 abnormal costs was recorded during the quarter, both of which heavily impacted Boeing’s bottom line.

Moreover, Boeing reported operating cash flows of $(3.2) billion but reinstated its commitment to reporting positive cash flow for the full-year fiscal 2022.

Segmental Details

Notably, Boeing delivered 95 commercial aircraft in Q1, up 23% compared to the prior-year period. However, the segment’s revenue fell 3% year-over-year to $4.16 billion due to the timing mismatch of wide-body jet deliveries.

Boeing’s 737 Max production has picked up pace from Q2, and the company expects to produce 31 jets per month. For the 787 jets, the company stated that it has submitted a certification plan to the Federal Aviation Authority (FAA) and awaits approval to resume deliveries of the amended aircraft.

Moreover, with the order from Qatar Airways, Boeing noted that it commenced production of the 777-8 freighter. However, delivery of 777-9 jets has been halted till 2023, which will result in abnormal charges to the tune of $1.5 billion beginning in Q2.

In the Defense, Space, and Security segment, Boeing’s revenue fell drastically by 24% to $5.48 billion compared to the prior-year period. The segment’s performance was impacted by lower volumes, inflationary pressures, and supply chain problems.

On the bright side, lifted by higher commercial volume and a favorable mix, the Global services segment reported a revenue jump of 15% year-over-year to $4.31 billion.

Executive Comments

Keeping faith in the company’s trajectory, Boeing’s President and CEO, Dave Calhoun, said, “Despite the pressures on our defense and commercial development programs, we remain on track to generate positive cash flow for 2022, and we’re focused on our performance as we work through certification requirements and mature several key programs to production. Leading with safety and quality, we’re taking the right actions to drive stability throughout our operations, deliver on our commitments to customers, and position Boeing for a sustainable future.”

Analysts’ View

Responding to Boeing’s quarterly performance, Cowen & Co. analyst Cai von Rumohr reiterated a Buy rating on the BA stock with a price target of $230, which implies 48.9% upside potential to current levels.

Calling the results “deck clearing quarter again,” Rumohr said he expects the market reaction to be neutral or negative. The analyst was not surprised by the company’s bigger than expected loss and cash outflow on multiple charges and continuing operating challenges.

Despite the dismal performance, analysts on the Street still have a Strong Buy consensus rating on the BA stock, which is based on 12 Buys and three Holds. The average Boeing price forecast of $252.15 implies 63.3% upside potential to current levels.

Ending Notes

Boeing is a leader in aircraft manufacturing and it long-term prospects remain intact, albeit the current scenario is bleak. The bullish outlook from the Street, coupled with the enthusiasm for the stock among retail investors and hedge funds makes Boeing a favorable stock at its current lows.

Discover new investment ideas with data you can trust 

Related News:
Alphabet Quarterly Results Missed Expectations, YouTube Revenue Disappoints
Microsoft Posts Upbeat Q3 Results on Cloud Strength, Provides Strong Guidance
Robinhood to Cut Jobs by 9%; Shares Down 5%