Stock Analysis

Jet-Propelled Boeing (NYSE:BA) is Not Catching up the Broad Market Yet

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NYSE:BA
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Following a promising run after the latest earnings, The Boeing Company(NYSE: B.A.) stock fell once again to test the critical support at US$210. With the underwhelming deliveries in August, the company now brings its yearly targets into the question – potentially bringing more downside.

In this article, we will check these latest developments and examine how much is the company lagging behind the broad market returns.

Latest Developments

Boeing recently released the annual forecast for the commercial and aerospace & defense market, exploring the industry's recovery in the post-pandemic period. The company projects a US$9tn market over the next decade, bumping it up from US$8.5tn a year ago.

Yet, these expectations seem to be falling short in practice, as the company is struggling to keep on the yearly order schedule, with 23 net orders in August. To reach the target of 225 aircraft in inventory by year-end, Boeing would have to ramp up the deliveries in the last quarter.

Furthermore, Ryanair has (temporarily?) walked away from the deal involving a 75 of 737 MAX 10 aircraft. Although they released a statement quoting price disagreements, it may be only a negotiation tactic.

As the latest addition to the delayed new Air Force One jet, the company is investigating the situation involving empty tequila bottles found on the yet unfinished aircraft. The future U.S. presidential jet will cost US$500m extra, on top of the US$3.9b deal that the former president Trump signed for 2 new aircraft in 2018.

Check out our latest analysis for Boeing

A look at the recent returns

In the last 5 years Boeing saw its revenue shrink by 9.7% per year. The falling revenue is arguably somewhat reflected in the lacklustre return of 10% per year over that time. That's pretty decent given the top-line decline and lack of profits. Of course, a closer look at the bottom line - and any available analyst forecasts - could reveal an opportunity (if they point to future growth).

You can see how earnings and revenue have changed over time (discover the exact values by clicking on the image).

earnings-and-revenue-growth
NYSE: B.A. Earnings and Revenue Growth September 23rd, 2021

Investors know Boeing well, and plenty of clever analysts have tried to predict future profit levels. So we recommend checking out this free report showing consensus forecasts

Total Shareholder Return (TSR)

Investors should note that there's a difference between Boeing's total shareholder return (TSR) and its share price change, which we've covered above. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs.

Dividends have been really beneficial for Boeing shareholders, and that cash payout contributed to why its TSR of 78% over the last 5 years is better than the share price return.

Conclusion

Looking at the last 5 years, we come to the return of 64%. That is certainly not bad, but it is far behind the overall market return of 120% and a 3-year loss of 41%.

Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. Yet, given the latest shenanigans, the odds of Boeing outperforming in the near term will not only depend on their ability to close deals but also on the ability to impose stricter internal controls.

To understand Boeing better, we need to consider many other factors. For example, we've discovered 2 warning signs for Boeing (1 shouldn't be ignored!) that you should be aware of before investing here.

In addition, you will not want to miss this free list of growing companies that insiders are buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on U.S. exchanges.

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.

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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, sells, services, and supports commercial jetliners, military aircraft, satellites, missile defense, human space flight and launch systems, and services worldwide.

High growth potential and fair value.