Key points
- Boeing shares are up slightly after the announcement that CEO Dave Calhoun will step down at the end of the year.
- The airline and defense contractor faces significant regulatory hurdles that will likely weigh on its profits and free cash flow.
- BA shares are still investable because they are part of a duopoly with Airbus, but investors may want to wait for more information when the company reports earnings in April.
- 5 stocks we prefer to Boeing
The Boeing company NYSE:BA shares rose just over 1% in early trading on March 25. Investors appear to be backing the company’s pre-market announcement that Chief Executive Officer (CEO) Dave Calhoun will step down at the end of the year.
In a related announcement, Boeing Board Chairman Larry Kellner announced he will step down for an additional term. Steve Mollenkopf, former CEO of Qualcomm Inc.NASDAQ:QCOMHe will immediately assume the chairmanship of the board and lead the search for a new CEO.
Boeing has had a turbulent 2024 and we’re just a quarter of the way there. The company’s airliners have been involved in several high-profile safety-related incidents that call into question the company’s quality control standards. At most, there are calls that the company should be shut down.
This might make you think twice about flying on one of the company’s jets. But when it comes to a company’s stock, sometimes things get so bad that they end up looking good. This may be what is happening to BA stock with this announcement. However, investors may still want to proceed with caution.
Boeing will face significant regulatory hurdles
No matter where you stand on government regulations, Boeing will be heavily regulated in the future. This will likely mean delays in aircraft certification and deliveries. This also means Boeing will have to reduce its forecast for how many planes it can deliver.
With updates like these, who needs downgrades?
At the end of March, German bank New York Stock Exchange: DB reiterated its buy rating on BA stock. However, the company lowered its price target from $270 set in November 2023 to $240. However, that would be a 30% increase over the current price.
The biggest concern for investors is that the rating came with numerous caveats. As noted above, it won’t be business as usual for the airliner going forward. This will reduce revenue, earnings and free cash flow (FCF).
Investors hope to learn more when Boeing reports its first-quarter earnings in late April. However, due to the uncertainty surrounding the FAA investigation, the company refrained from providing forward guidance when it filed its report in January.
Members of Congress are selling their stocks
Another reason investors should be concerned is that members of Congress have been selling BA stock in the first three months of 2024. Usually, investors are wise to remember that they have many reasons to sell a stock. However, the timing of these sales raises concerns.
On Jan. 9, Rep. Blake Moore (R-Utah) sold as much as $15,000 in BA stock. This came just days after the Alaska Air flight that launched the FAA probe. Moore serves on the House Budget Ways & Means Committee.
And on Feb. 28, Rep. Bill Keating (D-Mass.) also sold up to $15,000 in Boeing stock. Keating is a member of the Armed Services and Foreign Affairs Committees. Significantly, Boeing is one of the largest defense stocks and generated approximately $24.9 billion in revenue from its defense businesses, or 32% of the company’s total revenue in 2023.
Participate in BA shares
Boeing is part of a duopoly in airline manufacturing Airbus SE OTCMKTS: EADSF, which represents 99% of all aeronautical production. A change in leadership and board of directors makes it less likely that draconian measures will be taken with Boeing; therefore, it is an investable proposition.
Analysts are generally bullish but have not had a chance to digest this latest news. Prior to this announcement, BA shares were approaching a support level around $178. If the company can confirm this level, there could be some upside. However, until the company releases earnings, the stock will likely be range-bound. Boeing suspended its dividend in 2020 and has yet to reinstate it.
Before you consider Boeing, you’ll want to hear this.
MarketBeat tracks daily Wall Street’s highest-rated and best-performing research analysts and the stocks they recommend to their clients. MarketBeat identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market takes hold… and Boeing wasn’t on the list.
While Boeing currently has a “Moderate Buy” rating among analysts, top-rated analysts believe these five stocks are better buys.
View the five stocks here
Are you looking to generate income with your stock portfolio? Use these ten actions to generate a safe and reliable source of investment income.
Get this free report