How Does Boeing’s Current Performance Compare To That of The 2008 Recession?

Boeing stock (NYSE: BA) currently trades at $170 per share, around 35% below its level in March 2021. In comparison, its peer – GE Aerospace stock (NYSE: GE) saw its stock surge 2.5x over the same period. Boeing saw its stock trading much lower at around $137 in June 2022, just before the Fed started increasing rates, and is now roughly 25% above that level. Returning to the pre-inflation shock level means that BA stock will have to gain around 60% from here, and we think it will take a while for Boeing to reach those levels. Our detailed analysis of Boeing’s upside post-inflation shock captures trends in the company’s stock during the turbulent market conditions seen over 2022. It compares these trends to the stock’s performance during the 2008 recession.

How Does Boeing’s Current Performance Compare With That During The 2008 Recession?

The change in BA stock has been far from consistent. 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 and UNP, and even for the megacap 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 elevated interest rates, clubbed with Boeing’s own 737 MAX issues, 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 recovery? From a valuation perspective, BA stock looks like it has ample room for growth. We estimate Boeing’s Valuation to be $210 per share, reflecting an upside of more than 20% from its current levels of $170. Our forecast is based on 1.6x revenues for BA, slightly lower than the 2.0x average value over the last five years. A slight decline in the valuation multiple from its historical average for Boeing seems justified, given the current curbs by the FAA and its impact on near-term profitability. We expect 2024 sales to be around $76 billion for the company and an adjusted loss of $3.55 per share, compared to $78 billion in sales and $5.81 loss per share in 2023.

• 2020 – early 2021: Increase in money supply to cushion the impact of lockdowns led to high demand for goods; producers unable to match up.
• Early 2021: Shipping snarls and worker shortages from the coronavirus pandemic continue to hurt supply.
• April 2021: Inflation rates cross 4% and increase rapidly.
• Early 2022: Energy and food prices spike due to the Russian invasion of Ukraine. Fed begins its rate hike process.
• June 2022: Inflation levels peak at 9% – the highest level in 40 years. The S&P 500 index declined more than 20% from peak levels.
• July – September 2022: Fed hikes interest rates aggressively – resulting in an initial recovery in the S&P 500 followed by another sharp decline.
• October 2022 – July 2023: Fed continues rate hike process; improving market sentiments helps S&P500 recoup some of its losses.
• Since August 2023: Fed has kept interest rates unchanged to quell fears of a recession, and it is prepared for rate cuts in 2024 and 2025.

In contrast, here’s how BA stock and the broader market performed during the 2007/2008 crisis.

Timeline of 2007-08 Crisis

• 10/1/2007: Approximate pre-crisis peak in S&P 500 index
• 9/1/2008 – 10/1/2008: Accelerated market decline corresponding to Lehman bankruptcy filing (9/15/08)
• 3/1/2009: Approximate bottoming out of S&P 500 index
• 12/31/2009: Initial recovery to levels before accelerated decline (around 9/1/2008)

Boeing and S&P 500 Performance During 2007-08 Crisis

BA stock declined from $107 in September 2007 (pre-crisis peak) to $31 in March 2009 (as the markets bottomed out), implying it lost 70% of its pre-crisis value. It recovered after the 2008 crisis to levels of around $54 in early 2010, rising nearly 72% between March 2009 and January 2010. The S&P 500 Index saw a decline of 51%, falling from levels of 1,540 in September 2007 to 757 in March 2009. It then rallied 48% between March 2009 and January 2010 to reach levels of 1,124.

Boeing’s Fundamentals Over Recent Years

Boeing’s revenue rose at an average annual rate of 10.3% from $58.2 billion in 2020 to $77.8 billion in 2023. There is a massive demand for new aircraft with a rise in global travel, and this trend is not going to change anytime soon. The aircraft manufacturers record most of the revenue upon the time of delivery and amid the FAA cap on Boeing, its 2024 sales growth is expected to take a hit. Boeing’s loss per share narrowed from $23.25 in 2020 to a loss of $5.81 per share in 2023. Has The 737 MAX Clipped Boeing’s Wings? Is Airbus A Better Pick? — offers more details on the ongoing issues with Boeing.

Does Boeing Have A Sufficient Cash Cushion To Meet Its Obligations Through The Ongoing Inflation Shock?

Boeing’s total debt declined from $64 billion in 2020 to $58 billion now, while its cash decreased from $26 billion to $13 billion over the same period. The company incurred $4 billion in cash outflows from operations in the last twelve months. Still, given its cash cushion, Boeing appears to be in a comfortable position to service its near-term obligations.

Conclusion

With the Fed’s efforts to tame runaway inflation rates helping market sentiment, we believe BA stock has the potential for more gains once fears of a potential recession are allayed. That said, unfavorable macroeconomic factors and, more importantly, the ongoing issues related to curbs on 737 Max production are some of the risk factors that could weigh on its stock in the near term.

While BA stock may 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 8/4/2024
[2] Cumulative total returns since the end of 2016

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