Boeing (BA) Stock Keeps Investors Waiting on Sidelines after Dismal Q4 2019 Performance

UTC by Bhushan Akolkar · 4 min read
Boeing (BA) Stock Keeps Investors Waiting on Sidelines after Dismal Q4 2019 Performance
Photo: The Boeing Company / Instagram

Analysts are closely watching Boeing’s plans as it reorganizes itself in coming out the 737 Max crash investigation. Boeing (BA) stock currently looks under pressure but Credit Suisse predicts no further downfall amidst growing positive news.

American aviation giant Boeing is facing tough times after two major incidents of its 737 Max planes crashing and killing over 350 people. Having been in the spotlight with these incidents, the company is also facing major setbacks for its revenue and earnings.

The Boeing company missed its targets of earnings-per-share for the second quarter in a row during Q4 2019. Soon after the results last month, Boeing (BA) stock price slipped close to $300 levels before recovering back ahead this month.

Not only is Boeing losing its market share to its European competitor Airbus, but it is also expecting the losses to mount further to a tune of $18 billion with the ongoing Max 737 saga. While the regulators are thoroughly probing these incidents, some larger questions remain unanswered.

Currently, the regulators have ordered Boeing to keep its 737 Max planes grounded until things settle down for the good. However, reports from the industry suggest that Boeing can likely to get them up and running by mid-2020.

Boeing (BA) Stock under Pressure with Struggling Order Book

Airlines companies like the Southwest and American Airlines have already removed the Max 737 jets from their orders. Besides, with the worsening PR, Boeing is also seeing the ripple effects of this on the order books for other models as well.

The company is already considering further cuts on its 787 productions from 14 to just 10 jets per month. Much of this has also to do with the China-U.S. trade tensions and lower orders coming from the Asian country, which is the world’s largest buyer of airplanes.

Besides, with the 787 productions, the employees of the Charleston South Carolina plant have also complained of unsafe manufacturing standards. All these incidents have ultimately hurt the company’s balance sheets in a big way.

The latest financial report shows that Boeing lost a whopping $636 million in 2019. This has been the company’s first annual loss in the last two decades after 1997. Boeing could manage to deliver only 380 airplanes in 2019 with negative orders for commercial jets.

Just a year before in 2018, Boeing was performing at its peak with its annual revenue crossing $100 billion for the first time. However, the two back-to-back Max 737 plane crash incidents have put a major dent on the company’s revenue. In early 2019, the Boeing stock was trading at a price of $446 as of March 1, 2019.

But 10 days later, when the second 737 Max crash news came, the stock started plummeting big time. By the end of 2019, Boeing stock had lost 25% of its value closing the year at $325. At press time, the Boeing stock is trading at $339 with the market cap under $200 billion.

Credit Suisse predicts the Boeing stock to move ahead to $367 amidst rising positive news. The company said:

“As far as the MAX is concerned, BA sees similar longer-term unit cash profitability compared to prior, while BA is also trying to front-end as much of the cash impact as possible. Consensus in the room was that 2023 could be a near-normal cash year, where production/deliveries would normalize while concessions would become largely immaterial”.

Airline Automation Good or Bad?

After an investigation into the 737 Max crash, it was found that a software malfunction in the automated systems got matters out of the pilots’ control. The automated systems forced the plane’s nose towards the ground while the pilots were completely unaware of it.

Speaking to Business Insider, Dr. Najmedin Meshkati, an engineering professor at the University of Southern California said:

“This crisis in Boeing has elevated concern about automation to a much higher level, whether we like it or not”.

This again triggers a long going debate in the aviation industry whether high-end automation is good or bad. Some of the experts have been arguing for long that excessive automation can pose such types of risks.

However, when compared to Boeing’s immediate market competitor Airbus, Boeing has adopted automation to a lower scale relatively. Although an interesting fact is that the industry’s safety records have improved as Boeing embraced automation more and more.

Well, with all the noise in the market, it will be interesting to see how the company performs ahead in 2020 and whether it can retain the tag of “world’s biggest planemaker”.

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Bhushan Akolkar

Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.

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