Boeing (BA) stockholders have had much to worry about lately, from President Donald Trump's China trade war to 737 Max crashes. But Boeing stock a good buy now? Investors should look at the aerospace giant's fundamentals and the stock chart.
Boeing Stock Fundamental Analysis
Boeing earnings per share growth has averaged 45% over the past three years, according to IBD's Stock Checkup. In Q1, Boeing earnings fell, and the aerospace giant suspended its share repurchases and guidance following the grounding of its 737 Max.
Management said it will provide clarity on its 2019 outlook once the plane returns to service and as production plans and the delivery ramp-up is clear. The Federal Aviation Administration signaled at a meeting in Montreal in late May that the 737 Max could be re-certified by late June at the earliest. But it's unclear how quickly other countries will follow.
On the revenue side, growth has averaged just 2% over the past three years. In Q1, the top line fell 2% to $22.9 billion. Commercial airplane unit revenue fell 9% to $11.8 billion.
The company said that 737 deliveries tumbled in Q1. Boeing recorded no new airplane orders for April. However, airlines could be saving their new order announcements for the Paris Air Show next month. Boeing 737 Max production has been cut temporarily to 42 a month from 52.
But while Wall Street analysts were bearish on Boeing stock ahead of Q1 earnings, some remained upbeat after the results, citing 737 Max-related costs that weren't as bad as some estimates. CFRA analyst Jim Corridore kept a buy rating on Boeing stock and a 450 price target.
Boeing Stock Technical Analysis
Boeing stock broke out of a cup-with-handle base in late January and then climbed nearly 14% to a new high in March. But shares then sold off as the 737 Max crisis spiraled, completing a so-called round trip from the buy point, which is a sell signal, according to Marketsmith analysis.
A round trip occurs when a stock gives up all the gains achieved during the breakout. Investors should take at least partial profits from a stock once it has risen 20%-25% from a buy point to avoid losing out on gains.
For now, Boeing stock is not showing any buy signals. Shares fell through its 200-day moving average in early May after breaking below its 50-day line nearly two months earlier. (The 200-day line is drawn in black on every daily chart in MarketSmith) Before Boeing stock can form a new base, it needs to climb above its 50-day line and 200-day line.
Renewed China trade war fears have hit the broader stock market recently, taking their toll on the Dow Jones aerospace giant. China is the world's largest market for new jets. While orders happen over years and decades, the combination of 737 Max woes and U.S.-China trade tensions leave Boeing vulnerable.
The relative strength line, which tracks a stock vs. the S&P 500 index, hit its lowest levels of the year earlier this month. The RS line is the blue line in the chart below. Boeing's Relative Strength score is a dismal 44.
Boeing stock's CAN SLIM fundamental metrics includes a weak 71 Composite Rating out of a best-possible 99 and an 69 EPS rating.
Boeing Stock Is Not A Buy
Boeing's technical weakness is clear. Boeing stock will continue to face fundamental challenges going forward due to the Boeing 737 Max. Bottom line: Boeing stock is not a buy right now.
Boeing 737 Max Woes
The aerospace giant is facing headwinds following the fatal crash of an Ethiopian Airlines 737 Max jet in March.
Officials suspect problems with the Maneuvering Characteristics Augmentation System are to blame for the Ethiopian Air crash as well as an October Lion Air crash. Combined, the two crashes killed 346 people.
The Boeing 737 Max planes have been grounded, and U.S. lawmakers are questioning the Federal Aviation Administration's oversight of certifying the new plane.
Even when Boeing 737 Max jets fly again, they face lingering skepticism. An IBD/TIPP Poll in April found that 51% of Americans who are following the Boeing crisis said they would avoid flying on a 737 Max once it has re-entered service, with 28% saying they were "very likely" to avoid it and 23% saying they were "somewhat likely."
And among investors tracking the news, 44% have a lower opinion of Boeing as a company, 1% have a more favorable view, and 54% said their view hasn't changed.
Boeing Defense News Mixed
Boeing's defense business is also facing negative news. The KC-46 tanker for the U.S. Air Force is more than two years behind schedule and has cost Boeing $3.5 billion in charges for cost overruns. Deliveries had to be stopped repeatedly this year after debris was found in delivered tankers.
But Boeing has seen some good news in the fighter jet market. The Air Force's 2020 budget request includes eight updated Boeing F-15X fighters. Future budgets could include 18 jets per year up until 2024, for $7.8 billion.
Boeing also produces the F/A-18 Super Hornet for the U.S. Navy and foreign militaries. And last year, it won an Air Force contract to produce the T-X trainer, which has extensive sales potential in the U.S. and abroad.
Boeing and other U.S. industrial giants got a lift when Congress re-established a quorum at the Export-Import Bank. The bank, which critics have called "The Bank of Boeing," can now approve loans again that are greater than $10 million.
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