Actions of Boeing (NYSE: BA) currently trading 35% below pre-Covid levels – losing nearly $ 67 billion in market cap due to MAX grounds and the pandemic. Interestingly, the company reported $ 18 billion and $ 3.8 billion in operating cash consumption last year and the first half of 2021, respectively. In addition, the high cash consumption figures are largely due to inventory build-up and other changes in working capital. While near-term weak demand from the pandemic is likely to strain the company’s finances, Trefis estimates that the 4% annual growth in global passenger traffic over the next two decades is likely to help shareholder returns. We highlight historical trends in income, earnings and stock price in an interactive dashboard analysis on Boeing Rating.
Long-term trends by segment
Prior to the pandemic and the MAX downtime, Boeing’s Commercial Aircraft, Defense and Global Services segments accounted for 57%, 26% and 17% of total revenue, respectively. For the five-year period from 2013 to 2018, the company’s frontline observed a 3% CAGR, which is pretty much in line with long-term trends in global passenger traffic. Our article, Are the long-term trends in favor of Boeing stocks?, highlights key aspects of Boeing’s Commercial Market Outlook. In addition, the company’s Defense and Global Services segments have also grown at a low single-digit rate in recent years. In terms of profitability, the operating profit margin of the Commercial Aircraft, Defense and Global Services segments was 14%, 6.5% and 15% in 2018, respectively. Given the high revenue contribution and profitability of the commercial aircraft segment, recovering demand for air travel is key to Boeing’s long-term inventory gains.
How did Boeing perform in the first half of 2021?
In the first half of 2021, Boeing reported revenue of $ 32 billion, up 12% from the previous year quarter, thanks to improved deliveries of commercial aircraft. The company generated operating income of $ 940 million and spent $ 3.9 billion in operating cash, primarily due to changes in working capital. Given positive trends in air travel demand and FAA approval of MAX aircraft, the company expects MAX production to reach 31 units per month by early 2022, up from 19 per month. currently. However, inventories stand at $ 82 billion – weighing on the balance sheet until 450 planes in the warehouse are delivered. (Related: Choose Boeing Stock over Northrop Grumman for short-term gains)
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