Since Monday, Boeing Co. (NYSE: BA) stock has risen 10%, and for the past month, it has risen 15%. This is good news for a company whose stock has seen a battering since the pandemic started. Year-to-date, it has fallen 25%, and we were beginning to think Boeing could not escape the bearish market until May when the stock formed a steep rise.
Last year, BA was trading at $250 but is now trading at $155. Many investors believe the stock will continue to rise. They are considering making BA a buy because the stock has sustained growth for two months. Why? The reason is related to the stock's fundamentals.
Boeing’s Fundamentals Are Being Revamped
First, the estimates for Boeing’s revenue for Q2 2022 are positive. We expect a 4% revenue increase to $17.7 billion. We also believe that the earnings per share will be 3 cents. BA’s second-quarter results will be released on July 27, one week from now, so watch out for it.
The flip side is the company's free cash flow. Free cash flow will fall by $520 million and operating cash flow by $299 million. However, judging by management's statements on July 12, there will be a rebound before the end of the year. We believe that at year's end, free cash flow will rise by $290 million and be $10 billion by the end of 2024. Free cash flow and BA stock exist in a direct relationship. Investors are watching for management to keep its word.
Secondly, the future perceptions of the company are positive. We expect that by 2023, earnings per share will grow to $5.77 and see an 81% increase in profits by 2024, to $8.73 per share.
Lastly, the rebound in BA’s fortunes is related to the recent announcement by Delta Airlines concerning the Boeing 737 MAX airplane. Delta said it ordered 100 Boeing 737 MAX airplanes, which would be delivered in 2025. The markets were enthusiastic about the news, which recently lifted the stock.
Why Delta Airlines Ordered 100 Boeing 737 MAX
On Monday, Delta Airlines (NYSE: DAL) announced it had ordered 100 Boeing 737 MAX airplanes. The news astonished the market because Boeing had not gotten regulatory approval for the airplanes. However, this shows confidence in Boeing by Delta Airlines.
You will note that two fatal plane crashes occurred in 2018 and 2019. In 2018, Lion Air Flight 610 crashed; in 2019, Ethiopian Airlines Flight 302 crashed. Both flights involved Boeing 737 MAX airplanes, with 380 lives lost. That prompted a worldwide grounding of the plane, and Boeing's reputation was at stake. This affected Boeing’s competitiveness with its archrival Airbus.
Boeing said there were significant changes to the flight deck alert system. However, it also believes that the Federal Aviation Administration (FAA) will approve the MAX for flights again. Delta Airlines has said they believe this will happen and want to be the first company to order the 737 MAX before other airlines.
Given the list price of Delta’s order, we know it is worth $13.5 billion. But considering past order history, Boeing typically discounts large orders, so the total price might eventually be lower.
How Will This Change Affect Boeing’s Competitiveness?
Boeing’s archrival is Airbus. Before the crash, both companies were head-to-head in market share. But during the pandemic, Airbus has taken a significant percentage of the market away from Boeing. Moreover, Boeing’s safety problems have been their Achilles’ heel.
In 2021, Airbus delivered 720 planes, an 18% increase over 2020. But for the same year, Boeing could only manage 340 deliveries, half of what Airbus delivered. Most of Airbus’ deliveries have been on the A320 planes.
But Boeing is slowly coming to a reckoning. In January of this year, Qatar Airlines ordered 100 planes from Boeing, an order that Airbus rejected, and now it is receiving another 100 orders from Delta Airlines. We believe that if Boeing can put its safety problems behind it, it will surpass Airbus in the market as it used to.
Right now, the stock is selling cheaper. Something is definitely cooking with Boeing.
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