Below par seems to be the norm for investors at Boeing, faced with a year ridden with challenges. As per S&P Global Market Intelligence, a 30.3% decline shackled the stock in the initial six months, as the company grapples with a plethora of setbacks.
Unpacking the Turbulence of 2024
The Boeing operations are structured into three segments, with only one shining in the current year. Regrettably, Boeing Global Services, the standout performer, is notably the smallest leg of the trio and can hardly be faulted for the slump witnessed by the stock.
Among the two laggards, Boeing Defense, Space, & Security (BDS) has remained in the shadows, dealing with a tumultuous phase common to defense firms. The narrative has been tainted by failed execution on distinguished programs like the KC-46 tanker, Air Force One, and the T-7 training jet, shoving BDS’s margin into the red. The declared negative margin in the second quarter, as articulated by CFO Brian West, is a testament to the obstacles faced, heightened by cost pressures from fixed-price development programs.
Prior indications from BDS painted a grim picture, accepting that their performance trailed the proposed recovery trajectory. This acknowledgement was made as early as October, setting the stage for a bleak quarter to follow.
Image source: Getty Images.
Struggles of Boeing Commercial Airplanes
The woes continue for Boeing with persistent concerns surrounding manufacturing quality, amplified by a prominent incident involving a door malfunction on an Alaska Airlines flight in January. The ensuing chaos, prompting a production halt and reassessment, particularly on the 737 aircraft, led to a mere 137 deliveries in the first half. This translates to a monthly output of slightly under 23, a far cry from management’s target of 38 aircraft per month by year-end 2024. Looking further, the planned escalation to a monthly output of 50 in 2025/2026 seems to be a distant dream at the moment.
Image source: Getty Images.
Boeing’s Cash Flow Conundrum
Given the accumulation of tribulations, West foresees the full year ending with a cash flow deficit, contrary to the earlier projection of low-single-digit billion free cash flow in 2024. The stark reality of the diminished cash flow outlook stands out as the primary catalyst behind the substantial stock plummet this year.
Considering an Investment in Boeing
Prior to diving into Boeing stock, it is imperative to ponder upon the insights provided by the Motley Fool Stock Advisor analyst team. Their exclusion of Boeing from the list of the 10 best stocks to buy now unveils a potential goldmine awaiting investors. Reflecting on success stories like Nvidia, where a $1,000 investment in 2005 yielded a staggering $791,929, Stock Advisor emerges as a beacon of prosperity, offering invaluable advice and frequent stock picks to steer investors toward financial growth.
*Stock Advisor returns as of July 8, 2024
