Boeing (BA) needs no introduction — it’s the granddaddy of the aerospace sector and basically part of a duopoly in terms of commercial jet construction with European peer Airbus, explains Mike Cintolo, growth stock specialist and editor of Cabot Top Ten Trader.
The story of the past few years has been mostly one of struggles; the pandemic hurt things, of course, but that led to persistent supply and cost issues and the company has had some trouble ramping production, too.
Really, though, this has never been about demand — the backlog here is $440 billion (jet demand remains strong after some dry post-pandemic years) — and now it appears the firm is getting over the execution hump.
Boeing is transitioning to thirty-eight 737’s per month while 787 production is up to four (translation: production targets from earlier this year are on track), with overall first-half deliveries of 266 planes, up 23% from 2022’s first-half tally, which is driving the top line higher.
Granted, earnings remain in the red, but more important here is free cash flow. Despite some snafus, management has stuck to its cash flow targets (~$4 billion of free cash flow, or north of $6.50 per share), with higher targets (up to $10 billion) looking out three years, too, and analysts see earnings following suit in the not-too-distant future. Plus, it probably doesn’t hurt that Airbus has its own supply chain snags.
That’s basically the whole story — Boeing has tons of demand, and if management can execute, sales, earnings and especially free cash flow should kite higher from here. In terms of mega-cap names, we like it.
Timing is everything in the stock market, and BA looks like it could be the perfect example of that. The stock had a rough go of it from its peak in early 2021 to its lows in May, June and September of 2022. But the stock came alive and ripped well above its moving averages by January of this year.
And then … the stock went dead, for months and months, with $195-ish the low and $220-ish capping any rallies. But now, finally, BA looks like it’s up and out, with a nice post-earnings breakout. We’re fine grabbing some here or on dips, with a stop near the 50-day line; currently, our loss limit is in the $215-$218 area.
