Boeing (BA) stockholders have had much to worry about lately, from President Donald Trump's China trade war to 737 Max crashes. The Dow Jones giant has lost support at key technical levels. Is 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 Q2, Boeing reported a core loss of $5.82 a share, but analysts polled by Zacks came up with earnings of $2.92 a share, down 12% from a year ago, after backing out 737 Max charges.
Boeing said earlier that it expects the 737 Max to return to service in Q4 and it will book an after-tax charge of $4.9 billion, or $8.74 a share, in Q2 for estimated potential payments related to the 737 Max's grounding. That follows a $1 billion charge in Q1 related to the 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 are clearer. In the wake of a newly discovered Boeing 737 flaw, the aviation giant won't submit a software fix to the FAA until September. Boeing had said for weeks that an earlier software fix was close.
Standard & Poor's, Moody's and Fitch have all warned they could lower their credit rating on Boeing stock, citing the 737 Max grounding.
Trouble remains in other areas, as the Securities and Exchange Commission is reportedly investigating the aerospace giant's financial disclosures relating to the jet's grounding.
The Justice Department, FBI and the Transportation Department inspector general's office also have been looking to see if the Dow Jones giant provided misleading information about the Boeing 737 Max to regulators and customers. And now the DOJ has subpoenaed records at a North Charleston, S.C., factory where the Boeing 787 Dreamliner is made, amid allegations of poor-quality work.
On the revenue side, growth has averaged just 2% over the past three years. In Q2, the top line fell 35% to $15.75 billion. Commercial airplane unit revenue fell 66% to $4.72 billion. Deliveries of Boeing's 737 plunged 82.5% to just 24 in Q2. Boeing delivered 239 jets in the first half of the year. That's down 37% from a year ago, allowing Airbus (EADSY) to top Boeing on that key score for the first time in eight years.
In July, Boeing deliveries totaled just 19 jets and orders totaled 31, marking a fourth straight month of zero 737 Max orders.
CEO Dennis Muilenburg said in Boeing's Q2 analyst call that a temporary shutdown is among other contingencies being considered if the 737 Max can't return to service by early Q4, as undelivered planes pile up at its Seattle-area factory.
Boeing stunned at the Paris Air Show with a massive 200-plane letter of intent from the International Airlines Group, parent of Aer Lingus, British Airways, and Iberia. The deal, which includes 737 Max jets, is worth $24 billion at list prices, but airlines typically get discounts for big orders.
Ethiopian Airlines CEO Tewolde GebreMariam, whose carrier lost a Boeing 737 Max in a crash, told Bloomberg during the air show that he has "more confidence" in Boeing as the aerospace giant works to fix issues with the plane's automatic flight control system.
However, in early July, Saudi budget carrier Flyadeal dropped a commitment to buy up to 50 Boeing 737 Max jets.
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 on the Boeing 737 Max crash and fallout. Boeing stock round-tripped the gain, 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.
BA stock was in the early stages of building the right side of a consolidation when the FAA ordered the company to address a new 737 Max flaw. Shares rose back above their 50-day and 200-day lines after Boeing announced the latest 737 Max charge, but the Q2 earnings report sent shares back below the 200-day. And they plunged back below the 50-day line in the days since then.
The relative strength line, which tracks BA stock vs. the S&P 500 index, has turned lower again after a brief rebound off its lowest levels since January 2018. The RS line is the blue line in the chart below.
Boeing stock's CAN SLIM fundamental metrics include a weak 45 Composite Rating out of a best-possible 99 and a 43 EPS rating.
China remains a concern for the Dow Jones aerospace giant. It's is the world's largest market for new jets. While orders come in and are filled over years and decades, the combination of 737 Max woes and U.S.-China trade tensions leave Boeing stock vulnerable.
Markets have been volatile in August as Trump threatened to impose new tariffs on $300 billion in China-made products. Beijing said it would retaliate if the new tariffs go into effect as planned in September.
Boeing 737 Max Woes
The aerospace giant is still 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 for months. U.S. lawmakers and overseas regulators are questioning the Federal Aviation Administration's oversight of certifying the new plane.
The Federal Aviation Administration is reportedly leaning toward not requiring new simulator training by pilots before the troubled 737 Max can return to service, Bloomberg reported. Instead, pilots could take a computer-based training course at home or in a classroom.
But the idea is already getting pushback from key members of the aviation community, including from Chesley "Sully" Sullenberger, who crash-landed a jet in the Hudson River in 2009.
Even when Boeing 737 Max jets fly again, they face lingering skepticism. The latest IBD/TIPP Poll found that 48% of Americans who are following the Boeing crisis said they would avoid flying on a 737 Max once it has re-entered service, down from 51% in an earlier poll.
But investors have grown more critical of Boeing as the problems with the 737 Max drag on, with 49% saying they now have a less favorable view of Boeing vs. 44% in the prior survey.
Boeing's main focus is getting the 737 Max back to service, leading to the delays in other projects.
Being is delaying the service debut of the ultra-long-haul version of its 777X due to engine delays with another Boeing 777X model and its emphasis on putting resources towards getting the 737 Max back to service.
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 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.
Boeing Stock Is Not A Buy
BA stock's technical weakness is clear and no discernible pattern is forming. Near-term earnings and sales are suffering, while the Boeing 737 Max remains grounded.
Bottom line: Boeing stock is not a buy right now.
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