Is Boeing Stock a Buy Before January 28?

Boeing (BA -1.37%) is set to announce its fourth-quarter 2024 earnings on January 28. Investors are keenly interested in what CEO Kelly Ortberg, who took the helm in August, will reveal about the company’s future. There are numerous avenues for improvement at Boeing, making this earnings report particularly significant.

Boeing's Outlook for 2025

Identifying what Boeing needs to achieve operationally in 2025 is relatively straightforward, but executing these plans presents a much greater challenge.

The Boeing Commercial Airplanes (BCA) division has an immediate goal of maintaining a steady monthly production rate of 38 737 MAX jets before considering any expansion of production. Achieving this target is crucial for rebuilding trust in Boeing's delivery capabilities and enhancing airline satisfaction, while also positively impacting profitability and cash flow. Historically, production volume increases have been a primary contributor to improved profit margins at BCA. Additionally, shareholders will be eager to hear if the 777X model remains on schedule for its anticipated first delivery in 2026.

Meanwhile, within the Boeing Defense, Space & Security (BDS) sector, investors will be looking for updates on progress in addressing risks associated with fixed-price development programs that have led to substantial financial losses for Boeing. It will be essential to hear how and when the BDS division can return to a stable profitability situation.

Upcoming Earnings Discussion

Unfortunately, investors may not receive all the information they hope for during the earnings announcement and the subsequent call. The cultural transformation required at Boeing, which Ortberg consistently emphasizes, will take time and sustained effort. As a result, minor fluctuations in quarterly earnings are unlikely to significantly change the overall outlook.

Aside from clarifying operational goals and management adjustments (notably, the BDS division still lacks a permanent CEO after Ted Colbert's departure in September), there remains a pressing need for Boeing to restore investor trust in its future guidance.

Restoring Investor Confidence

There is a concerning trend in manufacturing leadership where CEOs leave office still professing guidance that the investing public has already dismissed. For instance, former General Electric (now GE Aerospace) leaders failed to retract overly ambitious goals during their tenures.

Boeing's ex-CEO, Dave Calhoun, faced similar criticism for not adjusting the ambitious prediction of $10 billion in free cash flow (FCF) for 2025/2026. In April 2024, CFO Brian West indicated ongoing confidence in achieving this target, stating that safety and quality would delay this goal.

Current consensus among Wall Street analysts suggests a projected cash outflow of $2.8 billion for 2025, in stark contrast to a previously stated aim, highlighting the need for Ortberg to consider recalibrating investors' expectations for 2025 guidance.

Adjustments in BDS Focus

On the subject of the BDS division, Ortberg has made it clear that Boeing cannot simply abandon its challenging fixed-price contracts. Instead, he emphasized the necessity to negotiate with customers to find mutually beneficial solutions.

Should You Buy Boeing Stock Before Earnings?

Boeing holds significant potential, backed by a robust backlog worth over half a trillion dollars and ongoing orders from airlines within the BCA division. Meanwhile, the path towards a turnaround in the BDS division hinges significantly on internal performance and the execution of strategic initiatives. Ortberg has a prime opportunity to reset investor expectations going forward.

Overall, while there is much anticipation surrounding Boeing's upcoming earnings report, investors may find it wise to hold off on purchasing until they have clearer insights into the company's plans for 2025, its capability to ramp up 737 MAX production, and its strategy to mitigate risks in the BDS fixed-price programs, ultimately aiming for a return to profitability.

Boeing, Stocks, Earnings