Mixed View
While the persistent macroeconomic uncertainty adds to the risk, the recent dip in valuation can be considered as a buying opportunity. Those who prefer to play it safe should follow the wait-and-watch strategy until at least the next earnings release, which is expected on January 27 before the opening bell.
Losing Streak
In the September-quarter, once again the company incurred a net loss, but the latest number was slightly better compared to the previous quarters. On a per-share basis, net loss was $1.39 in the third quarter, compared to earnings of $1.45 per share in the corresponding period of last year. However, the bottom line came in above analysts’ prediction. Overall, the performance was impacted by the COVID-induced travel restrictions that resulted in a 29% drop in revenues to about $14 billion.
New Hopes
Recovery hopes brightened after regulators in the U.S. recertified 737 MAX for resuming operations, about a year after it was grounded following two major crashes that claimed hundreds of lives. Adding to the positive sentiment, the roll-out of COVID vaccines across the globe is expected to bring the aviation sector back on track, putting an end to the turbulence that started several months ago. While the worst seems to be over for the company, the recovery is going to take a long time due to the economic headwinds.
From Boeing’s third-quarter 2020 earnings conference call:
“As we look to the medium and long-term, we see our original prognosis more or less still holds. Consistent with IATA and other industry groups, we still expect it will take around three years for travel to return to 2019 levels and a few years beyond that to return to long-term growth trends. Demand for narrow-body aircraft is expected to recover faster than widebody demand as domestic and regional markets will outpace longer haul international routes. Availability and wide distribution of a vaccine may help accelerate the demand improvement.“
Take Off
The company restarted pending deliveries of 737 MAX units last month – mainly to American Airlines (AAL), Southwest Airlines (LUV), and United Airlines (UAL) — but customers might not be very eager to place fresh orders for the troubled aircraft, given the controversy surrounding its safety.
Read management/analysts’ views of Boeing’s Q3 2020 earnings
Boeing’s stock is still languishing in the multi-year lows seen in early 2020 when the markets were battered by the coronavirus outbreak. Trading almost at half the pre-crisis value, it has underperformed the market since then. The shares, which lost about 38% in the past twelve months, traded slightly above the $200-mark on Tuesday, maintaining the modest uptrend that followed Monday’s fall.