The Dow Jones Industrial Average ($DOWI), though its composition has evolved over time, remains a widely watched equity index on Wall Street. Comprising 30 prominent U.S. companies, the Dow offers a more focused view of the stock market compared to the S&P 500 Index ($SPX) or the expansive Nasdaq Composite ($NASX). Despite its narrower scope, Dow stocks are recognized as industry giants, and their price movements carry significance.
Year-to-date, the Dow has seen modest gains of around 3%, contrasting with the 30% surge in the Nasdaq and 14% rise in the S&P 500. Notably, Boeing (NYSE:BA), a $116 billion aerospace leader, has experienced a recent decline of nearly 20% over the last three months.
Over a longer timeframe, Boeing has outperformed the broader market, recording a 16% gain in the past 52 weeks. Analysts project further upside in the coming year.
Is the current dip an opportunity to invest in this established blue-chip stock? Let’s delve into Boeing’s performance and its future potential.
Reasons Behind Boeing’s Stock Decline
Boeing’s stock price decline can be attributed to its reporting of a larger-than-expected net loss of $1.64 billion in Q3 2023. This marked the fifth consecutive quarter of losses for the company, with a downward adjustment in its full-year 737 production forecast. Ongoing costs related to manufacturing issues and significant losses on costly contracts, including the Air Force One project, have contributed to this downturn.
However, Q3 revenue outpaced expectations, increasing by 13% to $18.1 billion. Boeing’s CEO, Dave Calhoun, remains optimistic about the company’s ability to meet its financial goals for the current year and beyond.
Boeing’s Upcoming Projects
Boeing boasts a substantial backlog of orders, amounting to $469.2 billion, marking a 7% increase from the previous quarter and a substantial 23% rise from the previous year. This backlog is the largest since 2019, indicating a considerable amount of contracted business.
One persistent issue for Boeing has been related to lingering manufacturing problems with its 737 MAX planes. A recent agreement with their supplier, Spirit AeroSystems (NYSE:SPR), offers clarity on how this will impact Boeing’s future. Additionally, there’s a pending deal with Vietnam Airlines to purchase 50 Boeing 737 Max jets worth $7.5 billion.
Furthermore, Boeing’s management has reiterated its goal to generate $3 billion to $5 billion in free cash flow for the year. While these are positive signs, Boeing still faces challenges such as production delays, high manufacturing costs, and sensitivity to external factors.
Wall Street’s Outlook for Boeing
Despite the challenges Boeing has encountered since 2018, Wall Street experts hold a positive view of the company’s future. The consensus is that Boeing is expected to return to profitability in Q1 2024, with an average earnings estimate of $0.20 per share.
For fiscal 2024, the average earnings estimate is $3.31 per share, representing a significant recovery from the anticipated $5.61 per share loss this year.
Analysts are notably bullish on Boeing, with a consensus “strong buy” rating. Out of 16 analysts, 13 recommend a “strong buy,” while 3 take a more conservative “hold” stance. Not a single analyst advises selling the stock.
The analyst community has set a mean price target for Boeing at $245.06, indicating a potential 28% increase from its current levels.
In Conclusion
Boeing isn’t the kind of investment you can set and forget. If you are comfortable with riding out market fluctuations, buying the stock during its downturn could be a strategic move. However, while analysts are optimistic, bear in mind that Boeing, despite being a “boring” Dow stock, remains in a loss-making position. Ensure that this volatile stock aligns with your investment strategy and risk tolerance.
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