For most of the last year, transportation sector stocks have taken a serious beating. With many people actively forbidden from travel and others questioning just how worthwhile travel actually is right now, the average consumer's interest in hopping a flight to anywhere has been sorely curtailed. Boeing (NYSE:BA) has been hit with this development on several fronts, and its latest earnings reports look more like a flameout on the runway than anything else.
Failure to Launch
Boeing reported results that can be described as little else but a catastrophe. The company reported a net loss for 2020 of $11.9 billion, which included a $6.5 billion charge in the fourth quarter as the pandemic slammed squarely into overall demand for new aircraft, and the issues with the 737 Max weighed heavily throughout. The fact that Boeing delayed the release of its new 777X plane until late 2023 didn't help matters either.
The news for the full year is disastrous enough, but the latest quarter was a major contributor to that overall loss. Wall Street consensus forecasts were looking for a quarterly loss of $1.80 per share. Not good news, but certainly understandable given conditions.
Boeing turned in a loss nearly nine times that level, at $15.25 per share.
The company did manage to turn in positive revenue, and actually beat expectations, bringing in $15.3 billion on the quarter. That beat an expected $15.07 billion, but was down 15% against the same time the preceding year. Moreover, Boeing doesn't seem to expect things to do a whole lot better in 2021, noting that the aviation industry will once again be under significant pressure from travel restrictions and present—albeit declining in many places—coronavirus infections.
Analyst Sentiment Recovering
Results like that might make you think to stay away from Boeing for some time to come, but that's not what our latest research reveals. While Boeing does have a consensus rating of “hold” right now—as it has for the last six months—the ratios comprising that rating are actually the most bullish they've been in those six months.
Six months ago, the company had five “sell” ratings, 13 “hold” and eight “buy” making up its consensus. Three months ago that slipped to six “sell”, 14 “hold” and nine “buy.” It recovered a month ago to seven “sell”, 10 “hold” and 13 “buy”, and now today, we're at six “sell”, nine “hold” and 13 “buy”, which is on the whole the best result Boeing has seen lately.
The price target has been fluctuating wildly in that time frame, though, going from $220.24 six months ago to $203.52 three months ago. A month ago it recovered to $223.57 before settling in at $216.60 today. Some of that activity has been recent; while Sanford C. Bernstein lowered its price target—and its rating—a couple weeks back to $199 and “underperform”, others have upgraded. A week ago, Berenberg Bank raised both rating and target to “hold” and $215. Both UBS Group and the Royal Bank of Canada set price targets in the $300 range.
An Opportunity in the Making?
It may sound like a puzzling notion, to think the catastrophic downward slide of Boeing might be an opportunity in disguise, but there's certainly something to be said for it. First, the biggest delays to Boeing's product line have been in wide-body jets typically used for overseas flights. Granted, overseas flights are likely to be crippled for a while, and that's going to put pressure on an entire product line for some time to come. However, that's not the only thing Boeing produces.
While it may require a bit of retooling on Boeing's part, it might find a brisk business in waiting for domestic travel. With vaccinations coming rapidly online—a development that's been visible since the Trump Administration—and treatment options increasingly in play, we're seeing a lot of places domestically looking to re-open their economies and give people a reason to actually travel again. Granted, the vaccinations aren't moving as rapidly as most would like—there are only a handful of companies actually making the stuff—and treatment options are only just coming into their own, but they're still available and growing. Combine a pile of pent-up demand with a growing availability and the notion of a return for aviation isn't out of line.
Getting in now, therefore, might be a smart plan as the chances of Boeing's recovery look halfway decent. Or, perhaps, hold out until the rollout of the 777X. Those looking to get in on Boeing need only look for a reasonable entry point, and based on what we've seen so far, some of those may be coming up in the next year or two.
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