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. Ali Bahrami, the Federal Aviation Administration's associate administrator for aviation, backed a Boeing timeline for a return to service by December for the 737 Max as the FAA safety review was broadened to include older 737 models.
But 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.
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 company said that 737 deliveries tumbled in Q1. No Boeing 737 Max jets have been delivered in the second quarter.
Boeing opened the Paris Airs 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, including Boeing 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.
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 since then has started move higher. Shares reclaimed their 50-day and 200-day moving averages on the Pair Air Show 737 Max orders. Boeing stock in the early stages of building the right side of a consolidation with a buy point of 446.11.
The relative strength line, which tracks a stock vs. the S&P 500 index, hit its lowest levels of the year earlier this month. The RS line is the blue line in the chart below. Boeing's Relative Strength score is a dismal 46.
Boeing stock's CAN SLIM fundamental metrics includes a below optimal 85 Composite Rating out of a best-possible 99 and an 70 EPS rating.
Renewed China trade war fears have taken on the broader stock market and the Dow Jones aerospace giant. China 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.
China trade war winds could be abate as Trump and Chinese President Xi Jinping are scheduled to meet on the sidelines of the G-20 economic summit in Japan at the end of June. But there's no guarantee that the Trump-Xi meeting will acheive much.
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 several 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 April found that 51% of Americans who are following the Boeing crisis said they would avoid flying on a 737 Max once it has re-entered service, with 28% saying they were "very likely" to avoid it and 23% saying they were "somewhat likely."
And among investors tracking the news, 44% have a lower opinion of Boeing as a company, 1% have a more favorable view, and 54% said their view hasn't changed.
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.
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 Boeing has seen some good news in the fighter jet market. 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
The 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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