Boeing (BA) stockholders have had much to worry about lately, from President Donald Trump's China trade war to 737 Max crashes. The Dow Jones giant has reclaimed key technical levels. But is Boeing stock a good buy now? Investors should look at the aerospace giant's fundamentals and the stock chart.
Boeing Stock Fundamental Analysis
Boeing earnings per share growth has averaged 45% over the past three years, according to IBD's Stock Checkup. In Q1, Boeing earnings fell, and the aerospace giant suspended its share repurchases and guidance following the grounding of its 737 Max.
Management said it will provide clarity on its 2019 outlook once the plane returns to service and as production plans and the delivery ramp-up is clear. In the wake of a newly discovered Boeing 737 flaw, the aviation giant won't submit a software fix to the FAA until September. Boeing had said for weeks that an earlier software fix was close.
But management offered more clarity July 18 when it said the 737 Max should return to service by Q4 and booked a $4.9 billion charge in Q2 for estimated overall costs related to the grounding. Boeing stock jumped.
Still, trouble remains in other areas, as the Securities and Exchange Commission is reportedly investigating the aerospace giant's financial disclosures relating to the jet's grounding.
The Justice Department, FBI and the Transportation Department inspector general's office have been looking to see if the Dow Jones giant provided misleading information about the Boeing 737 Max to regulators and customers. And now the DOJ has subpoenaed records at a North Charleston, S.C., factory where the Boeing 787 Dreamliner is made, amid allegations of poor-quality work.
On the revenue side, growth has averaged just 2% over the past three years. In Q1, the top line fell 2% to $22.9 billion. Commercial airplane unit revenue fell 9% to $11.8 billion.
The Boeing earnings report for the second quarter is due July 24. It's already released Q2 delivery figures though. Deliveries of Boeing's 737 plunged 82.5% to just 24 in Q2. Boeing delivered 239 jets in the first half of the year. That's down 37% from a year ago and allowed Airbus (EADSY) to top Boeing on that key score for the first time in eight years.
The company said that 737 deliveries tumbled in Q1. No Boeing 737 Max jets have been delivered in the second quarter.
Boeing opened the Paris Air Show on June 17 with no orders. But it stunned analysts the next day with a massive 200-plane letter of intent from the International Airlines Group, parent of Aer Lingus, British Airways, and Iberia. The deal, which includes 737 Max jets, is worth $24 billion at list prices, but airlines typically get discounts for big orders.
Ethiopian Airlines CEO Tewolde GebreMariam, whose carrier lost a Boeing 737 Max in a crash, told Bloomberg during the air show that he has "more confidence" in Boeing as the aerospace giant works to fix issues with the plane's automatic flight control system.
However, in early July, Saudi budget carrier Flyadeal dropped a commitment to buy up to 50 Boeing 737 Max jets.
Boeing Stock Technical Analysis
Boeing stock broke out of a cup-with-handle base in late January and then climbed nearly 14% to a new high in March. But shares then sold off on the Boeing 737 Max crash and fallout. Boeing stock round-tripped the gain, which is a sell signal, according to MarketSmith analysis.
A round trip occurs when a stock gives up all the gains achieved during the breakout. Investors should take at least partial profits from a stock once it has risen 20%-25% from a buy point to avoid losing out on gains.
Boeing stock kept falling to 330.67 on June 3, but then turned around and started to move higher.
BA stock was the early stages of building the right side of a consolidation when the FAA ordered the company to address a new 737 Max flaw. Shares rose back above their 50-day and 200-day lines after Boeing announced the Q2 charge.
The relative strength line, which tracks BA stock vs. the S&P 500 index, also rebounded sharply after hitting its lowest levels since January 2018. The RS line is the blue line in the chart below.
Boeing stock's CAN SLIM fundamental metrics includes a weak 72 Composite Rating out of a best-possible 99 and an 78 EPS rating.
China remains a concern for the Dow Jones aerospace giant. It's is the world's largest market for new jets. While orders happen over years and decades, the combination of 737 Max woes and U.S.-China trade tensions leave Boeing vulnerable.
Trump and Chinese President Xi Jinping agreed on a China trade war truce at the G-20 summit at the end of June. But there's no guarantee how long the truce will last.
Boeing 737 Max Woes
The aerospace giant is still facing headwinds following the fatal crash of an Ethiopian Airlines 737 Max jet in March.
Officials suspect problems with the Maneuvering Characteristics Augmentation System are to blame for the Ethiopian Air crash as well as an October Lion Air crash. Combined, the two crashes killed 346 people.
The Boeing 737 Max planes have been grounded for months. U.S. lawmakers and overseas regulators are questioning the Federal Aviation Administration's oversight of certifying the new plane.
Even when Boeing 737 Max jets fly again, they face lingering skepticism. An IBD/TIPP Poll in May and June found that 48% of Americans who are following the Boeing crisis said they would avoid flying on a 737 Max once it has re-entered service, down from 51% in an earlier poll.
But investors have grown more critical of Boeing as the problems with the 737 Max drag on, with 49% saying they now have a less favorable view of Boeing vs. 44% in the prior survey.
Boeing said at the Paris Air Show that it would consider dropping the Max from the plane's name as it conducts a global study of consumers and airlines following the two fatal crashes. But CEO Dennis Muilenburg said later that company is focused on safety, not rebranding.
Boeing Defense News Mixed
Boeing's defense business is also facing negative news. The KC-46 tanker for the U.S. Air Force is more than two years behind schedule and has cost Boeing $3.5 billion in charges for cost overruns. Deliveries had to be stopped repeatedly this year after debris was found in delivered tankers.
But the Air Force's 2020 budget request includes eight updated Boeing F-15X fighters. Future budgets could include 18 jets per year up until 2024, for $7.8 billion.
Boeing also produces the F/A-18 Super Hornet for the U.S. Navy and foreign militaries. And last year, it won an Air Force contract to produce the T-X trainer, which has extensive sales potential in the U.S. and abroad.
Boeing and other U.S. industrial giants got a lift when Congress re-established a quorum at the Export-Import Bank. The bank, which critics have called "The Bank of Boeing," can now approve loans again that are greater than $10 million.
Boeing Stock Is Not A Buy
BA stock's technical weakness is clear. Near-term earnings and sales are suffering, while the Boeing 737 Max remains grounded.
Bottom line: Boeing stock is not a buy right now.
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