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How to Play Boeing Stock After Q4 Earnings Miss & Dismal Cash Outflow?
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The Boeing Company (BA - Free Report) recently delivered mixed fourth-quarter 2024 results, wherein its top line surpassed the Zacks Consensus Estimate but its bottom line missed the same. However, on a year-over-year basis, both the metrics declined.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
The year-over-year deterioration can be primarily attributed to the adverse impact of the International Association of Machinists and Aerospace Workers (“IAM”) work stoppage and agreement. The company’s operating cash outflow as of Dec. 31, 2024, was $12.08 billion against an operating cash inflow of $5.96 billion as of Dec. 31, 2023.
Such a dismal cash flow from operations and operational results might adversely impact investor’s decisions pertaining to investing in the stock. A prudent investor knows that a significant decision like buying a stock should not depend on a company’s single quarterly performance alone. Instead, to make a more informed decision, one should be mindful of its performance over the past year in terms of share price return, long-term prospects as well as risks (if any) to investing in the same. We have provided a detailed discussion on this, as one can see below.
Boeing Lags Industry, Sector & S&P500
Boeing’s shares have lost 14.5% over the past year, underperforming the Zacks aerospace-defense industry’s decline of 3.8%. The stock has also lagged the broader Zacks Aerospace sector’s return of 5.2% as well as the S&P 500’s gain of 24.5% in the said time frame.
Image Source: Zacks Investment Research
The company's one-year price return also came in below that of two key commercial jet makers, Embraer (ERJ - Free Report) and Textron (TXT - Free Report) , and its arch-rival, Airbus Group (EADSY - Free Report) . Notably, shares of Embraer and Airbus have surged 123.2% and 7.3%, respectively, while those of Textron lost 10.7%.
What Caused BA Stock to Tumble?
Boeing has been suffering significantly at the bourses in recent times due to multiple factors that have led it to deliver dismal performance over the past few quarters. This, in turn, must have hurt investors’ confidence in this stock, as is evident from its deteriorating share price return. While product quality issues for some of BA’s major commercial jet programs like 737 and 787 have been a prime growth inhibitor lately, the IAM work stoppage added to the American jet maker’s woes by the end of 2024.
In particular, the work stoppage further delayed the company’s earlier estimated timeline for increasing the production rate for a handful of its significant programs and launching new products in the market. This delay is likely to increase Boeing’s inventory and storage costs, in addition to hindering its revenue growth prospects in the near term, adding to investors’ concerns.
What Lies Ahead for BA Stock?
Although Boeing continues to face adversities in the commercial aerospace industry, its future seems bright when it comes to the aftermarket aircraft service industry. Notably, the steadily rising demand for air travel and the replacement of aging fleets are expected to drive the need for new jets and aftermarket services, serving as key growth drivers for Boeing.
The outlook for the aerospace giant’s defense business also remains optimistic. In the fourth quarter of 2024, its defense unit secured key contract awards worth $8 billion, resulting in a solid backlog of $64.02 billion for this segment as of Dec. 31, 2024.
Such solid backlog counts boost revenue growth prospects for Boeing, thereby bolstering its bottom-line performance.
In line with this, the consensus estimate for BA’s long-term (three-to-five years) earnings growth rate is pegged at 17.4%, higher than the industry’s 14.4%.
A quick sneak peek at the company’s upcoming estimates also mirrors similar growth prospects.
Estimates for Boeing
The Zacks Consensus Estimate for first-quarter 2025 sales suggests an improvement of 11.9% from the year-ago quarter’s reported figure, while that for earnings also indicates a significant year-over-year increase. A similar improvement trend can be observed in its 2025 estimates.
However, the bottom-line estimate for first-quarter and full-year 2025 suggests a downward movement over the past 60 days. This indicates analysts’ declining confidence in the stock.
Image Source: Zacks Investment Research
Image Source: Zacks Investment Research
Risks to Consider Before Choosing Boeing
While Boeing offers strong growth prospects, it continues to face significant challenges, particularly in the commercial aerospace industry, that could affect its operational performance. Investors should carefully consider this before investing in the stock. A notable concern is the persistent supply-chain issues, particularly arising from a shortage of aircraft parts, which, to date, continue to affect the global aviation industry and, in turn, may affect Boeing.
Looking ahead, the International Air Transport Association’s December 2024 outlook report suggests a 21.4% decline in the number of aircraft deliveries projected for 2025 from its earlier expectation, with persisting supply-chain issues playing the role of a primary growth inhibitor. Fewer jet deliveries imply lower demand for Boeing aircraft, thereby weakening its near-term revenue generation prospects.
In addition, industry-specific challenges, like the shortage of skilled labor, continue to threaten Boeing.
BA Stock’s Dismal ROIC
The stock’s trailing 12-month return on invested capital (ROIC) not only lags the industry but also reflects a negative figure. This indicates that the company's investments are not generating sufficient returns to cover its costs.
Image Source: Zacks Investment Research
Should You Invest in BA Stock Now?
To conclude, investors interested in Boeing should wait for a better entry point, considering the stock’s poor ROIC and dismal performance at the bourses. BA currently has a VGM Score of F, which is also not a very favorable indicator of strong performance.
However, those who already own this Zacks Rank #3 (Hold) stock may continue to do so, considering its solid growth potential in 2025, particularly in defense and jet service market spaces. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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How to Play Boeing Stock After Q4 Earnings Miss & Dismal Cash Outflow?
The Boeing Company (BA - Free Report) recently delivered mixed fourth-quarter 2024 results, wherein its top line surpassed the Zacks Consensus Estimate but its bottom line missed the same. However, on a year-over-year basis, both the metrics declined.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
The year-over-year deterioration can be primarily attributed to the adverse impact of the International Association of Machinists and Aerospace Workers (“IAM”) work stoppage and agreement. The company’s operating cash outflow as of Dec. 31, 2024, was $12.08 billion against an operating cash inflow of $5.96 billion as of Dec. 31, 2023.
Such a dismal cash flow from operations and operational results might adversely impact investor’s decisions pertaining to investing in the stock. A prudent investor knows that a significant decision like buying a stock should not depend on a company’s single quarterly performance alone. Instead, to make a more informed decision, one should be mindful of its performance over the past year in terms of share price return, long-term prospects as well as risks (if any) to investing in the same. We have provided a detailed discussion on this, as one can see below.
Boeing Lags Industry, Sector & S&P500
Boeing’s shares have lost 14.5% over the past year, underperforming the Zacks aerospace-defense industry’s decline of 3.8%. The stock has also lagged the broader Zacks Aerospace sector’s return of 5.2% as well as the S&P 500’s gain of 24.5% in the said time frame.
Image Source: Zacks Investment Research
The company's one-year price return also came in below that of two key commercial jet makers, Embraer (ERJ - Free Report) and Textron (TXT - Free Report) , and its arch-rival, Airbus Group (EADSY - Free Report) . Notably, shares of Embraer and Airbus have surged 123.2% and 7.3%, respectively, while those of Textron lost 10.7%.
What Caused BA Stock to Tumble?
Boeing has been suffering significantly at the bourses in recent times due to multiple factors that have led it to deliver dismal performance over the past few quarters. This, in turn, must have hurt investors’ confidence in this stock, as is evident from its deteriorating share price return. While product quality issues for some of BA’s major commercial jet programs like 737 and 787 have been a prime growth inhibitor lately, the IAM work stoppage added to the American jet maker’s woes by the end of 2024.
In particular, the work stoppage further delayed the company’s earlier estimated timeline for increasing the production rate for a handful of its significant programs and launching new products in the market. This delay is likely to increase Boeing’s inventory and storage costs, in addition to hindering its revenue growth prospects in the near term, adding to investors’ concerns.
What Lies Ahead for BA Stock?
Although Boeing continues to face adversities in the commercial aerospace industry, its future seems bright when it comes to the aftermarket aircraft service industry. Notably, the steadily rising demand for air travel and the replacement of aging fleets are expected to drive the need for new jets and aftermarket services, serving as key growth drivers for Boeing.
The outlook for the aerospace giant’s defense business also remains optimistic. In the fourth quarter of 2024, its defense unit secured key contract awards worth $8 billion, resulting in a solid backlog of $64.02 billion for this segment as of Dec. 31, 2024.
Such solid backlog counts boost revenue growth prospects for Boeing, thereby bolstering its bottom-line performance.
In line with this, the consensus estimate for BA’s long-term (three-to-five years) earnings growth rate is pegged at 17.4%, higher than the industry’s 14.4%.
A quick sneak peek at the company’s upcoming estimates also mirrors similar growth prospects.
Estimates for Boeing
The Zacks Consensus Estimate for first-quarter 2025 sales suggests an improvement of 11.9% from the year-ago quarter’s reported figure, while that for earnings also indicates a significant year-over-year increase. A similar improvement trend can be observed in its 2025 estimates.
However, the bottom-line estimate for first-quarter and full-year 2025 suggests a downward movement over the past 60 days. This indicates analysts’ declining confidence in the stock.
Image Source: Zacks Investment Research
Image Source: Zacks Investment Research
Risks to Consider Before Choosing Boeing
While Boeing offers strong growth prospects, it continues to face significant challenges, particularly in the commercial aerospace industry, that could affect its operational performance. Investors should carefully consider this before investing in the stock. A notable concern is the persistent supply-chain issues, particularly arising from a shortage of aircraft parts, which, to date, continue to affect the global aviation industry and, in turn, may affect Boeing.
Looking ahead, the International Air Transport Association’s December 2024 outlook report suggests a 21.4% decline in the number of aircraft deliveries projected for 2025 from its earlier expectation, with persisting supply-chain issues playing the role of a primary growth inhibitor. Fewer jet deliveries imply lower demand for Boeing aircraft, thereby weakening its near-term revenue generation prospects.
In addition, industry-specific challenges, like the shortage of skilled labor, continue to threaten Boeing.
BA Stock’s Dismal ROIC
The stock’s trailing 12-month return on invested capital (ROIC) not only lags the industry but also reflects a negative figure. This indicates that the company's investments are not generating sufficient returns to cover its costs.
Image Source: Zacks Investment Research
Should You Invest in BA Stock Now?
To conclude, investors interested in Boeing should wait for a better entry point, considering the stock’s poor ROIC and dismal performance at the bourses. BA currently has a VGM Score of F, which is also not a very favorable indicator of strong performance.
However, those who already own this Zacks Rank #3 (Hold) stock may continue to do so, considering its solid growth potential in 2025, particularly in defense and jet service market spaces. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.