Stock Analysis

Boeing's (NYSE:BA) Debt is One Step Ahead of Short-term Improvements

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NYSE:BA
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The Boeing Company ( NYSE:BA )seems unable to catch a break. Between 737MAX issues, a global pandemic, and the latest Starliner issues, there is almost always a negative catalyst ongoing.

Naturally, this all comes at a cost, and today we will be examining Boeing's debt.

Latest Developments

Indian authorities announced that they would soon clear 737MAX for flights in that country. Boeing is in talks with the new Indian airline Akasa to sell as many as 80 737MAX jets.

China remains the last major market that keeps the 737MAX grounded, now for nearly 2.5 years. The company keeps up conducting the test flights , and CEO Dave Calhoun remains optimistic about getting the approval within this year.

On a positive note, Boeing took 31 plane orders in July , versus 17 cancellations. This means that new sales outpaced the cancellations for the 6th straight month. So far, the company has already scored 270 net sales and 184 deliveries, more than in the whole of 2020.

However, Starliner delays remain an issue, as noted by the Bank of America analyst Ronald Epstein who quoted poor management culture, lack of governance oversight, and dis-investment in engineering as key Boeing problems . Bank of America keeps a Neutral rating and a US$265 price target for the stock.

See our latest analysis for Boeing

Debt Outlook

The chart below, which you can click on for greater detail, shows that Boeing had US$63.1b in debt in June 2021, about the same as the year before.

However, it does have US$21.3b in cash, offsetting this, leading to net debt of about US$41.8b.

debt-equity-history-analysis
NYSE:BA Debt to Equity History August 18th, 2021

The Balance Sheet

In the balance sheet data, we can see that Boeing had liabilities of US$88.2b due within 12 months and liabilities of US$77.2b due beyond that. On the other side, it had US$21.3b in cash and US$11.7b in receivables that were due within 12 months.

So it has liabilities totaling US$132.4b more than its cash and near-term receivables combined.

Hypothetically, extremely heavy dilution would be required if the company was forced to pay down its liabilities by raising capital at the current share price.When analyzing debt levels, the balance sheet is the obvious place to start.But ultimately the future profitability of the business will decide if Boeing can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts .

Over 12 months, Boeing made a loss at the EBIT level, and saw its revenue drop to US$62b, which is a fall of 7.4%.We would much prefer to see growth.

Conclusion

Boeing had earnings before interest and tax (EBIT) loss over the last year, a loss of US$4.0b at the EBIT level.

While things seem to be getting better after the latest earnings surprise, we'd want to see some solid near-term improvements before getting too excited about the stock.

And with the US$14b in negative free cash flow, it's on the risky side of things.The balance sheet is the area to focus on when you are analyzing debt.But ultimately, every company can contain risks that exist outside of the balance sheet. For instance, we've identified 2 warning signs for Boeing you should be aware of.

Of course, if you're the type of investor who prefers buying stocks without the burden of debt, then don't hesitate to discover our exclusive list of net cash growth stocks , today.

Valuation is complex, but we're helping make it simple.

Find out whether Boeing is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis

Simply Wall St analyst Stjepan Kalinic and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Stjepan Kalinic

Stjepan Kalinic

Stjepan is a writer and an analyst covering equity markets. As a former multi-asset analyst, he prefers to look beyond the surface and uncover ideas that might not be on retail investors' radar. You can find his research all over the internet, including Simply Wall St News, Yahoo Finance, Benzinga, Vincent, and Barron's.

About NYSE:BA

Boeing

The Boeing Company, together with its subsidiaries, designs, develops, manufactures, sales, services, and supports commercial jetliners, military aircraft, satellites, missile defense, human space flight and launch systems, and services worldwide.

The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.

Analysis AreaScore (0-6)
Valuation3
Future Growth4
Past Performance0
Financial Health0
Dividends0

Read more about these checks in the individual report sections or in our analysis model.

Reasonable growth potential and fair value.