Boeing: Charting a Course for Recovery and Redemption

The Boeing Co. (NYSE: BA) stock has been trying to recover after a tumultuous 2024, enabling smaller aircraft manufacturers like Embraer S.A. (NYSE: ERJ) to accelerate their business. Boeing’s production facilities are finally back online. While the company reported a pretty ugly fourth quarter of 2024 earnings report, investors are clearly focused on what lies ahead after the 32,000-worker union strike concluded on Nov. 5, 2024. With over half a trillion dollars in backlog, the aerospace sector giant is making its way on the road to recovery and redemption with the public and investors.

The Final Kitchen Sink Quarter

Boeing reported a loss of $5.90 per share or $3.8 billion in the fourth quarter of 2024, missing consensus estimates for a loss of $3.22 by a whopping $2.68 per share. Revenues collapsed 30.8% YoY to $15.24 billion, missing the already reduced consensus estimates of $15.68 billion. The company pointed out that the results were impacted by the International Association of Machinists and Aerospace Workers (IAM) strike and agreement. Operating cash flow was negative at $3.5 billion, and free cash flow was negative at $4.1 billion. The backlog at the year’s end was $521 billion, with over 5,500 airplanes driven by continued strength in commercial air travel.

Its Commercial Airplanes division revenue fell 55% YoY to $4.76 billion with an operating margin of negative 43.9%. The Defense, Space & Security division fell 20% YoY to $5.41 billion with a negative 41.9% operating margin. On a bright note, Global Services’ revenues actually grew 6% YoY to $5.12 billion with a 19.5% operating margin. The segment secured awards for C-17 sustainment and a contract for F-15 Japan Super Interceptor upgrade service from the United States Air Force.

For the full year 2024, Boeing saw revenues fall by sinking by more than $10 billion. Boeing delivered 348 commercial airplanes and recovered 279 net orders.

Time to Right the Ship on the Road to Redemption

The bright side is that the seven-week strike has finally concluded, and operations are trying to return to normal, actually better than normal. The company took careful measures over several weeks to dedicate time to retrain workers and ensure parts and tools were ready before ramping production back up to pre-strike levels. By the end of the quarter, production resumed across the 737, 767, and 777/777X programs. Boeing ended the quarter and 2024 with $26.3 billion in cash and investments as a result of a $24 billion capital raise. Debt levels fell to $53.9 billion from $57.7 billion at the beginning of the quarter, primarily from repaying a $3.5 billion bond.

Boeing CEO Kelly Ortberg commented, "We made progress on key areas to stabilize our operations during the quarter and continued to strengthen important aspects of our safety and quality plan. My team and I are focused on making the fundamental changes needed to fully recover our company's performance and restore trust with our customers, employees, suppliers, investors, regulators, and all others who are counting on us."

BA Stock Attempts a Cup Pattern

A cup and handle pattern is comprised of two separate patterns: a cup and a handle. The cup is formed as a stock peaks a swing high, marking the lip line as shares fall to a swing low, form a rounding bottom, and rally back to retest the cup lip line. After the cup pattern is complete, the stock rejects again from the lip line to form a shallow pullback before turning back up again to retest the cup lip line, forming the handle. The cup and handle breakout occurs if the stock can break out above the cup lip line on the handle bounce and in the third attempt.

BA formed a cup lip line at the $196.95 swing high on Jul. 31, 2024, before shares cascaded down to a swing low of $136.68 during the IAM strike. BA staged a rally just ahead of the final negotiations, rising to a peak of $182.72 before pulling back to the daily anchored VWAP, which has risen to $166.39. Shares are still attempting to rise towards the cup lip line. The daily RSI is chopping flat at $ 59-band. Fib pullback support levels are at $173.93, $167.67, $159.70 and $149.64.

BA stock’s average consensus price target is 8.87% higher at $195.00, and its highest analyst price target sits at $250.00. It has 14 analysts' Buy ratings, eight Holds, and one Sell rating. The stock has a 3.72% short interest.

Bullish investors can consider using cash-secured puts at the Fib pullback support levels to buy the dip. If assigned the shares, then writing covered calls at upside Fib levels executes a wheel strategy for income.

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