With more than a $90 billion market cap, The Boeing Company (BA) designs, develops, manufactures, sells, and services commercial jetliners, military aircraft, satellites, missile defense, human space flight, and launch systems worldwide. The company operates through Commercial Airplanes; Defense, Space & Security; Global Services; and Boeing Capital segments.

The aerospace and defense giant has been facing continued regulatory concerns and uncertainty surrounding demand for its core products. On July 2, BA’s Chief Executive, Dave Calhoun, said that the plane maker could be forced to cancel the 737 Max 10 over potential regulatory issues.

BA has more than 640 orders for MAX 10 plans from 17 airlines. The company has a deadline of December to win approval for the 737 MAX 10, the significant member of its best-selling single-aisle airplane family.

Furthermore, the current macroeconomic environment has added new concerns for Boeing’s investors. The company's sales could be affected by the Russia-Ukraine war causing a spike in oil prices, record-high inflation, and increasing the odds of a recession.

While the geopolitical tensions have benefitted the defense sector, BA’s wider-than-expected first-quarter loss and a sharp decline in revenue weighed on investor sentiment. The stock has plummeted 34.4% in price over the past six months and 29.9% year-to-date to close the last trading session at $147.72.

It is currently trading 39.7% below its 52-week high of $241.15, which it hit on August 12, 2021. However, the stock has gained 5.7% over the past month.

Here is what could influence BA’s performance in the near term:

Weak Financials

For the fiscal 2022 first quarter ended March 31, 2022, BA's revenue declined 8.1% year-over-year to $13.99 billion. Its costs and expenses for the first quarter amounted to $13.65 billion. Its loss from operations widened substantially from the year-ago value to $1.17 billion.

BA’s loss before income taxes stood at $1.62 billion, compared to a $572 million reported in the prior-year period. In addition, the company's net loss and loss per share came in at $1.24 billion and $2.06, worsening 121.4% and 123.9% year-over-year, respectively.

Bleak Growth Prospects

Analysts expect the company’s revenues to rise 18.8% year-over-year to $74.03 billion in fiscal 2022 (ending December 31, 2022). However, the consensus loss per share estimate is expected to come at $1.34 for the year.

Also, the company’s loss per share for the fiscal 2022 second quarter (ended June 2022) is expected to come in at $0.16, widening 140% year-over-year. Furthermore, the company has missed the consensus EPS estimates in three of the trailing four quarters.

Low Profitability

In terms of trailing-12-month gross profit margin, BA’s 6.14% is 79.3% lower than the 29.59% industry average. Its trailing-12-month EBITDA margin of 0.09% is 99.4% lower than the 13.17% industry average. Likewise, the stock’s trailing-12-month CAPEX/Sales of 1.70% is 41.2% lower than the industry average of 2.89%.

Furthermore, BA’s trailing-12-month ROTC and ROTA are negative at 2.89% and 3.60%, respectively.

High Valuation

In terms of forward EV/Sales, BA’s 1.78x is 14.1% higher than the 1.56x industry average. Its 26.56x forward EV/EBITDA is 169.9% higher than the 9.84x industry average. In addition, the stock’s 76.34x forward Price/Cash Flow is 503.6% higher than the 12.65x industry average.

POWR Ratings Reflect Bleak Prospects

BA's overall rating of D translates to Sell in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 distinct factors, with each factor weighted to an optimal degree.

BA has a grade of F for Growth, consistent with analysts’ weak bottom-line estimates. In addition, the stock has a D grade for Quality, in sync with its lower-than-industry profit margins.

BA is ranked #64 out of 77 stocks in the Air/Defense Services industry.

Beyond what I have stated above, we have also given BA grades for Value, Stability, Sentiment, and Momentum. Get all the BA ratings here.

Bottom Line

BA reported disappointing fiscal 2022 first-quarter results. Moreover, the company has been under pressure due to continued quality concerns and slowing demand for its core products. Also, the ongoing macroeconomic headwinds could dampen the company’s performance.

Given BA’s poor financials, bleak growth prospects, low profitability, and frothy valuation, we think the stock is best avoided now.

How Does Boeing Company (BA) Stack Up Against its Peers?

While BA has an overall POWR Rating of D, one could check out these other stocks within the Air/Defense Services industry: Moog Inc. (MOG.A) with a rating of A and Astronics Corporation (ATRO) and Innovative Solutions and Support, Inc. (ISSC) with a B rating.

BA shares were trading at $155.83 per share on Tuesday afternoon, up $8.11 (+5.49%). Year-to-date, BA has declined -22.60%, versus a -16.88% rise in the benchmark S&P 500 index during the same period.

Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.

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