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Boeing Co (BA US) $US154.65

UPDATED 09/10/2024 09:24

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In 2018, Boeing generated revenue of just shy of $US100bn, making $US9.35bn in net profit underpinning a fantastic return for shareholders, with the stock ‘flying’ to a 2019 peak of $US446. Times have been tough since, with COVID grounding fleets around the globe and with such a significant fixed cost base, BA felt the pinch more than most. While they experienced a strong recovery out of COVID with the stock almost tripling from the lows, ongoing engineering, safety and production issues have plagued BA, with their rap sheet a very concerning one in recent years.

The short of it is that Boeing seemed to forget they operated in a highly technical and challenging area, with a 2001 decision to move head-office away from production leading to a progressive erosion in quality and safety which has ultimately caused fatalities and very hard-to-quantify reputational damage.

While this is not a stock we’ve owned before, and we’re not about to buy it, we cover today for 3 key reasons that could turn BA around in coming years;

A new CEO has just taken over, Kelly Ortberg, who has a strong engineering background and will be based in Seattle (home of production), not their corporate headquarters in Chicago. This is a big change and could signal a new beginning.
Ultimately there are two global aircraft manufacturers of substance, Boeing & Airbus, both have had issues in recent times, however, both are critical companies globally on many levels.
Boeing is a major supplier to the US Government and has very rigid defence contracts in place, underpinning future work.

The array of issues that have plagued BA over the past five years have had a significant financial impact, and BA has lost money each year since 2020. While there is a very long road ahead, they have taken the right step in the appointment of a well-regarded ‘technical’ CEO rather than a ‘financial’ engineer, which has been the norm in recent times.