Is Now a Good Time to Buy Beaten-Down Boeing Stock?

The first month of 2024 has caught Boeing Company (BA) in the eye of the perfect storm. After a high-profile incident early this month where one of the doors blew off a Boeing 737 Max jet mid-flight, multiple fleets were grounded by large customers to allow for investigation. As a result, carriers including Alaska Air Group (ALK) and United Airlines (UAL) have indicated their future jet orders with Boeing may be at risk.

Ahead of the company's upcoming Jan. 31 earnings report - set for release before Wednesday's market open - the stock has corrected by an alarming 23% this month, and BA is still hovering near oversold territory.

Does this steep pullback present a buying opportunity in Boeing - or are the fundamental challenges facing the stock too weighty right now? Here's a closer look at the key points to consider for BA stock, and what analysts are forecasting. However, does this represent a suitable time for investors to take a chance on Boeing, which produces not only commercial jetliners but military aircraft, satellites, and rockets too? The wider analyst community thinks so and here are the possible reasons why.

Can Boeing Beat on Earnings?

Boeing missed Wall Street's expectations with its October earnings report, announcing revenue of $18.1 billion for the quarter ended Sept. 30, against expectations of $18.25 billion. Revenue was up 13% year-over-year, as the company's two major revenue segments - Defense, Space & Security and Global Services - notched yearly growth of 3% and 9%, respectively. The growth in the defense segment is particularly noteworthy amid a slowdown in government contracts for the company. Despite a yearly decline of 6% in deliveries of commercial airplanes, revenues from this source were up 25% to $7.9 billion.

Losses, which have continued to remain a pain point for Boeing, almost halved to $3.26 per share from $6.18 in the previous year. However, the quarterly deficit was still slightly wider than what analysts expected.

The company closed the third quarter with a cash balance of $6.8 billion, easily outstripping its short-term debt obligations of $4.9 billion.

In tomorrow's Q4 report, analysts will be looking for BA to announce an adjusted loss of $0.72 per share, much improved from a loss of $1.75 per share in the year-ago period. Revenue is expected to rise 5.5% year-over-year to $21.08 billion. 

In the last four quarters, Boeing has fallen short of Wall Street's bottom-line estimates on three occasions.

Boeing's Order Backlog

Boeing's order book will likely be in focus tomorrow. While this month's 737 Max issues won't be reflected in the December quarter results, investors and analysts will look for any hints into expected impacts on the company's order pipeline going forward, as major carriers threaten to shift their fleet mixes away from Boeing's jets. 

As of the most recent quarter, Boeing had a massive order backlog of $469.2 billion, with a total of 5,626 planes in backlog. Notably, 4,332 of those orders are for the contentious 737 make.

Production guidance will also be closely watched. While investors will likely attempt to read the data for any signs of weakening demand or fleeing customers, management will also be looking to guard against criticisms of rushed manufacturing practices at Boeing. Previously, the company had guided for higher 787 and 737 production by 2025-26.

Notably, cancellation and deferral requests for Boeing's aircraft were 2.6% in 2023, well below the historical average of 6%.

What's the Forecast for BA Stock?

Following the 737 Max fiasco, analysts at Morgan Stanley updated their outlook for Boeing, deeming the stock worthy of an “equal weight” rating with a $255 price target. That includes a bull case target of $300 and bear case target of $130, though the analysts ultimately concluded, “We continue to see balanced risk-reward in the long term as we see the Bear case underappreciated by the market and the Bull case is limited by supply chain constraints."

While still unprofitable, most analysts expect BA to grow at a faster pace than the broader industrial sector. Forward revenue growth is pegged at 12.94%, which is well above the 7.5% sector median.

Analysts still have a consensus rating of “Strong Buy” for the stock, with a mean target price of $270 - about a 35% premium to current levels, indicating the majority leans more bullish than Morgan Stanley. However, this configuration could change based on the commentary from management tomorrow, so investors may want to hold off on adding BA shares until there's more clarity on the impact of the 737 Max groundings.

Out of 20 analysts covering the stock, 14 have a “Strong Buy” rating, 1 has a “Moderate Buy” rating, and 5 have a “Hold” rating.