It’s been a turbulent year for Boeing’s [BA] share price. While COVID-19 has been a significant factor in bringing the company to a stand-still, so too has the continued grounding of its 737 MAX airliners.
Boeing’s share price hit a five-year low on 20 March when it closed at $95.01, down 70.83% year-to-date.
Although the share price managed to recover some its value in Q2, closing at $230.50 on 8 June, its highest value since the slump, Boeing lost most of its gains in the following three-day trading period – closing at $170, down 47.81% in the year-to-date, on 11 June.
The stock has dropped 47.6% for the year to date. Will its Q2 earnings report, due 29 July, give Boeing’s share price a much-needed lift?
How has Boeing been performing?
When Boeing released its Q1 earnings on 29 April, it reported a loss of $1.70 per share, which came in narrower than the Zacks consensus estimate of a loss of $2.04, a surprise of 16.67%. However, this was a stark contrast to the same period last year, when the company reported earnings of $3.16 per share.
For the quarter ended March 2020, Boeing posted revenue of $16.91bn, which missed the Zacks consensus estimate by 1.6% and was 26.22% lower than 2019’s Q1 revenue of $22.92bn. Over the past four quarters, Boeing’s actual revenue has only surpassed consensus estimates once.
In a statement released alongside the report, president and CEO David Calhoun said: “The COVID-19 pandemic is affecting every aspect of our business, including airline customer demand, production continuity and supply chain stability.”
“The COVID-19 pandemic is affecting every aspect of our business, including airline customer demand, production continuity and supply chain stability” - President & CEO David Calhoun
He continued by saying he was confident that the company would get through the period due to the company’s portfolio of products and its technology being well-positioned for the upcoming recovery.
With worldwide lockdowns restricting international travel, Boeing’s earnings have been severely affected by the pandemic. This has compounded the problems experienced with its 737 MAX planes which, following two fatal crashes, have been grounded since March 2019.
Boeing is keen to get its planes back in the air, but Reuters recently revealed that “the FAA is unlikely to unground the 737 MAX before sometime in October.”
Although Boeing spokesman Gordon Johndroe said the company is “working closely with the FAA and other international regulators” to return the 737 MAX to service, it’s worth noting that the ongoing incident has already cost the company more than $18bn.
As a result, Boeing’s orders book took a downturn and cancellations continue to exceed new orders. So far this year, the company has lost 323 orders.
For Q2, Boeing is expected to report a loss of $2.93 per share for the quarter ended June 2020, which will represent a loss of 200.3% year-on-year. The consensus estimate has been revised 29.4% lower in the 30 days up to 22 July, according to Zacks.
Revenues are also expected to decline to $12.61bn, a loss of 20% from the same quarter last year.
Boeing's expected Q2 revenue - a 20% YoY decline
What the analysts think
“We believe Q2 will be the trough for deliveries, but the pace of recovery now appears to be more muted than hoped for just a few months ago,” said Canaccord Genuity analyst Ken Herbert.
“Considering the importance of the MAX to [Boeing’s] FCF, we believe sentiment on the stock will be bracketed between an accommodating monetary policy, which will limit the downside, and soft fundamentals (MAX orders and deliveries), which will limit the upside. We see incremental risk to the MAX backlog and delivery schedule.”
“We believe Q2 will be the trough for deliveries, but the pace of recovery now appears to be more muted than hoped for just a few months ago” - Canaccord Genuity analyst Ken Herbert
Herbert reiterated a hold rating on Boeing’s share price and gave a $155 target. This is contrary to the Zacks sell rating, but is in line with the consensus among 27 analysts polled by CNN Money. This rating was given by a majority of 13, while nine analysts rated it a buy and four a sell.
Looking even further ahead, Zacks research suggests “shares of Boeing are projected to drop a whopping 217.2% in the September quarter.”
Among 24 analysts offering 12-month share price forecasts, CNN Money reports a median target of $161 — a 7.1% decline on Boeing’s share price as of 28 July.
|Operating Margin (TTM)||-6.79%|
|Quarterly Revenue Growth (YoY)||-26.2%|
Boeing share price vitals, Yahoo Finance, 29 July 2020