Aerospace giant The Boeing Co. (NYSE: BA) has had a tumultuous year, making negative headlines on a weekly basis regarding safety protocol violations and whistleblower allegations. From mid-air turbulence to parts falling out of the sky to the infamous Boeing 737 MAX 9 fuselage door that flew off mid-flight on an Alaska Air Group Inc. (NYSE: ALK) flight as a result of no bolts on the door panel.
Boeing has been investigated by the National Transportation Safety Board (NTSB), the Federal Aviation Administration (FAA), and the United States Justice Department. This has resulted in Boeing stock trading down 31% year-to-date (YTD). However, amidst all the turmoil, the company continues to win billion-dollar contracts.
Boeing competes in the aerospace sector with Airbus SE (OTCMKTS: EADSY) and in the defense industry with Raytheon Technologies Co. (NYSE: RTX) and Lockheed Martin Co. (NYSE: LMT).
The Power of an American Duopoly for Boeing
It seems no matter how ugly the news gets on Boeing, the aircraft orders and contracts continue to come in. It pays to be an American duopoly as its only true competitor for building commercial passenger aircraft is France's Airbus. In that sense, the company is Teflon. Its entry into the space race to challenge Space X with its astronaut-occupied Starliner was delayed on June 1, 2024, minutes before the scheduled launch. This is the second launch delay, with the first on May 25 after discovering a helium leak. No reason was given for the June 1st delay, but it's been rescheduled for later in June.
While Boeing has garnered most of the attention for its commercial airplanes, the company is also a major player in the defense industry. As a matter of national security, Boeing is not only too big to fail, it's also too big to jail.
Boeing is Awarded a $7.48 Billion Air Force Contract
On May 27, 2024, Boeing's subsidiary Boeing Defense Space and Security out of St. Louis, Missouri, won a $7.48 billion fixed-price-incentive-fee, firm-fixed-price, indefinite-delivery/indefinite-quantity contract action for Joint Direct Attack Munition (JDAM). The contract calls for JDAM kit spares, repairs, and Laser Joint Direct Attack Munition (LJDAM) sensor kits. The work is expected to be completed by June 2030.
A Rising Channel Forms on Boeing Stock
BA illustrates a rising price channel pattern. This pattern is comprised of parallel trendlines representing higher highs and higher lows. It indicates that buyers have been patiently buying the dips at higher levels on pullbacks. The dips happen in a single large red candle, which is then built back up with a series of smaller candles, demonstrating the stock's resiliency. The daily relative strength index (RSI) is coiling back up again at the 50-band. Pullback support levels are at $171.61, $167.50, $159.70 and $152.80.
Boeing reported a Q1 2024 non-GAAP core EPS loss of $1.13, which beat consensus estimates for a loss of $1.63 by 50 cents. Revenues fell 7.5% YoY to $16.57 billion, beating estimates of $16.24 billion. The company took steps to slow down 737 production in an effort to strengthen and improve quality.
Boeing's Quality Management Improvements and Supply Chain Optimization
The Commercial Airplanes segment revenues fell 31% YoY to $4.65 billion with a negative 24.6% segment operating margin. This reflects the production slowdown to under 38 deliveries per month to incorporate improvements to its quality management systems and reduce traveled work inside its factories and supply chain.
The segment booked 125 net orders, including 85 of the 737-10 airplanes for American Airlines Group Inc. (NASDAQ: AAL) and 28 777x airplanes for customers, including Ethiopian Airlines. The segment delivered 83 airplanes in the quarter with a backlog of over 5,600 airplanes valued at $448 billion.
Boeing's Defense, Space and Security Segment is Robust
Q1 2024 revenues for its Defense, Space and Security segment rose 6% YoY to $6.95 billion. Operating margin improved to 2.2%, driven by higher volume and improved performance. The segment won awards for 17 P-8A Poseidon aircraft for the Royal Canadian Air Force and German Navy. The segment secured the final new-build production contract from the United States Navy for 17 F/A-18 Super Hornets and won a contract for MQ-25 cost-type contract modifications from the Navy, including 2 additional test aircraft. The backlog in the segment was $61 billion, of which 31% were international orders.
Boeing President and CEO Dave Calhoun commented, "Our first quarter results reflect the immediate actions we've taken to slow down 737 production to drive improvements in quality. We will take the time necessary to strengthen our quality and safety management systems, and this work will position us for a stronger and more stable future."
