Having Lost 15% So Far This Year, Is Boeing Stock Undervalued At $210?

Boeing (NYSE: BA) recently reported its Q4 results, with top and bottom lines well above street estimates. Although there are near-term headwinds for the company stemming from the ongoing 737 MAX 9 issues, we believe BA stock has ample room for growth. The company reported revenue of $22 billion and an adjusted loss of $0.47 per share, compared to the consensus estimates of $19.5 billion in sales and a loss per share of $0.72. In this note, we discuss Boeing’s stock performance, key takeaways from its recent results, and valuation.

BA stock has seen little change, moving slightly from levels of $215 in early January 2021 to around $210 now, vs. an increase of about 35% for the S&P 500 over this roughly three-year period. Overall, the performance of BA stock with respect to the index has been lackluster. Returns for the stock were -6% in 2021, -5% in 2022, and 37% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 – indicating that BA underperformed the S&P in 2021.

In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for heavyweights in the industrials sector, including CAT, UNP, and GE, and even for the mega-cap stars GOOG, TSLA, and MSFT. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index, less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.

Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could BA face a similar situation as it did in 2021 and underperform the S&P over the next 12 months – or will it see a strong jump? From a valuation perspective, BA stock looks like it has ample room for growth. We estimate Boeing’s Valuation to be $259 per share, reflecting an upside of more than 20% from its current levels of $210. Our forecast is based on 2.0x revenues for BA, aligning with the average value over the last five years. We expect 2024 sales to be around $89.5 billion for the company and an adjusted profit of $3.54 per share, compared to $77.8 billion in sales and $5.81 loss per share in 2023.

Boeing’s revenue of $22 billion in Q4 was up 10% y-o-y, primarily due to a 13% growth in commercial airplanes, while global services segment sales were up 6%, and defense, space, and security revenue was up 9%. Commercial airplane deliveries increased 3% y-o-y to 157 in Q4. The company didn’t provide any guidance for 2024 while it maintains its outlook for 2025-26.  The company’s core operating margin stood at 0.4% in Q4 versus -3.2% in the prior-year quarter. Boeing’s adjusted loss of $0.47 per share in Q4 narrowed from a loss per share of $1.75 in the prior-year quarter.

The start of 2024 hasn’t been great for Boeing, with its stocks plunging over 15% so far this year. This can primarily be attributed to an incident in which the cabin side panel detached midair on Alaska Air (Boeing 737 Max 9) flight 1282. Following the incident, the Federal Aviation Administration grounded Boeing 737 Max 9 aircraft, mainly run by Alaska and United. Recently, one of Boeing’s suppliers found a new problem with fuselages on several unfinished 737 Max planes. These incidents have resulted in uncertainties and a very likely delay in deliveries.

Although there are near-term headwinds for Boeing, its long-term growth prospects look solid, with a backlog of $520 billion. The company should be able to sort out its production issues and ramp up production for 737 aircraft in the coming years. We think that Boeing will post a profit in 2024 and likely see strong earnings growth in the coming years. We believe investors can use the current dip in BA to enter for robust long-term gains.

While BA stock looks like it can see higher levels, it is helpful to see how Boeing’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

[1] Returns as of 2/8/2024
[2] Cumulative total returns since the end of 2016

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