Boeing Posts Gloomy Q3 Earnings: Time to Hold or Let Go of the Stock?

The Boeing Company BA disappointed its investors with its third-quarter 2024 results, wherein both its top and bottom-line figures deteriorated year over year. The company’s earnings and revenues also came in short of their respective Zacks Consensus Estimate. A major factor that contributed to the latest dismal performance of this jet giant was the recent labor strike initiated by the International Association of Machinists and Aerospace Workers (IAM) at Boeing. The strike resulted in work stoppage and, consequently, production pause of some of BA’s critical programs.  On the brighter side, the company’s cash and cash equivalents (along with short-term and other investments) at the end of the third-quarter of 2024 totaled $10.47 billion, which came in higher than its current debt of $4.47 billion. So, we may safely conclude that Boeing holds a strong solvency position, at least in the near term. Moreover, its current ratio of 1.13 indicates that BA has sufficient capital in hand to pay off its short-term debt obligations. Now, it is difficult to make a critical decision about investing in a stock just by looking at its latest quarterly report. A prudent investor should thoroughly analyze how BA has performed so far in terms of share price return, its long-term prospects, and the risks (if any) associated with investing in the stock.BA Stock Lags Industry, Sector & S&P 500Shares of America’s largest passenger aircraft maker have lost 41.4% year to date, underperforming the Zacks aerospace-defense industry and the broader Zacks Aerospace sector’s decline of 9.6% and 1.4%, respectively. BA also lagged the S&P 500’s rise of 22.2% in the said time frame.Image Source: Zacks Investment ResearchThe company's year-to-date return also lagged that of two key commercial jet makers, Embraer ERJ and Textron TXT, whose shares surged 88.1% and 1.6%, respectively.What Led to BA Stock’s Freefall?Despite the soaring commercial air traffic steadily boosting the demand for commercial jets in recent times, the plight of Boeing, particularly that of its commercial airplanes business segment, seems to continue. While the company has been facing some major critical internal challenges related to its product quality, particularly 737 and the latest labor strike, industry issues like supply-chain disruption in commercial aerospace have also affected BA's growth. Although Boeing was able to deliver a higher number of 737 jets in the third quarter compared with the year-ago level, all its 737-9 aircraft in production are still undergoing the same enhanced inspection process before being delivered, thanks to the Alaska Airlines accident.While this inspection has already caused a slowdown in the 737 production rate, the ongoing labor strike has added to the company’s woes by causing an altogether production pause, which is expected to further delay the delivery of finished 737 jets. The work stoppage is also projected to hurt the progress of its other programs. For instance, the required rework of its 787 jets is now delayed, and so is the delivery of its 777-9 and 777-8 freighter aircraft. Consequently, the company can be expected to witness a slowdown in its revenue growth in the near term. Clearly, these factors seemed to have made BA’s investors wary about its near-term progress, which was reflected in its dismal share price performance lately.Additionally, persistent supply-chain challenges plaguing the commercial aerospace industry are causing aircraft makers and aerospace parts suppliers to struggle to keep up with the soaring demand, thereby limiting the potential for timely delivery of finished aircraft. This industry headwind seems to have played its part in pulling down not only Boeing’s performance but also that of its arch-rival, Airbus Group EADSY, whose shares have lost 1.5% in the year-to-date period.Will the BA Stock Recover Soon?Looking ahead, we may expect the company to produce better results on the virtue of its varied products and services, ranging from combat jets and missiles to aviation aftermarket services in both commercial and military aerospace industries. Notably, the Boeing Defense, Space & Security (BDS) segment won key contract awards worth $8 billion in the third quarter, resulting in a solid backlog of $61.62 billion, as of Sept. 30, 2024. Such a solid backlog count indicates notable revenue generation prospects for BA’s defense business segment in the coming quarters.Long-term growth prospects for BA’s services business also remain solid. Notably, the company forecasts a $4.4-trillion market opportunity for commercial aviation support and services over the next 20 years. This should bode well for its services business unit over the long run, with a total backlog of $20.45 billion as of Sept. 30, 2024.However, its near term prospects remains a bit uncertain, which we can corroborate by taking a look at its upcoming estimates.BA’s Estimates: A Mixed BagBoeing’s 2024 earnings estimate mirrors a year-over-year decline, while the same for 2025 reflects growth. So, we may expect the stock to rebound from its current peril as we progress toward 2025.Its sales estimates also reflect a mixed picture. While the 2024 sales estimate reflects a year-over-year decrease, the same for 2025 indicates improvement.Image Source: Zacks Investment ResearchBA Stock’s Dismal ROICThe stock’s trailing 12-month return on invested capital (ROIC) not only lags the industry’s return but also reflects a negative figure. This indicates that the company's investments are not generating sufficient returns to cover its costs.Image Source: Zacks Investment ResearchTo Hold or Fold?To summarize, despite the long-term growth potential offered by the company, it is not advisable for investors to buy the BA stock right now. One should wait for a better entry point, considering Boeing’s poor ROIC, dismal year-to-date performance, dim near-term outlook as well as persistent industry challenges.BA currently has a VGM Score of F, which is also not a very favorable indicator of strong performance. The company’s Zacks Rank #4 (Sell) further supports our thesis.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Zacks Names #1 Semiconductor StockIt's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom.With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028.See This Stock Now for Free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report The Boeing Company (BA): Free Stock Analysis Report Embraer-Empresa Brasileira de Aeronautica (ERJ): Free Stock Analysis Report Textron Inc. (TXT): Free Stock Analysis Report Airbus Group (EADSY): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks