Stock Analysis & Ideas

Boeing Soars on String of Good News; Shares Up 6%+

Story Highlights

Boeing shot up over 6% halfway through Monday’s trading session as a string of good news hit the company and sparked investors’ attention. However, with potential headwinds lurking, Boeing will have a tough time keeping those gains going.

Aircraft manufacturing giant Boeing (BA) took a beating over the last several months. With issues keeping its planes grounded and its future uncertain, a wave of good news hit the company and sent it up over 6% halfway through Monday’s trading session. Boeing managed to avert a potential strike, at least temporarily, after sending a proposed labor agreement to defense workers.

The union—the International Association of Machinists and Aerospace Workers—is set to vote on the proposed agreement Wednesday.

Further, Boeing landed great news via the Federal Aviation Administration. The agency approved Boeing’s plan to inspect and address issues found on the 787 Dreamliner, which will allow the planes to actually start arriving for customers again.

The last 12 months for Boeing shares saw the company stage a steep and protracted drop from its 52-week high last August to its 52-week low back in June. The company has recovered from the low and is starting a new climb, back up to clear the $165 per share mark.

I was bearish when I last wrote about Boeing back in May, and that was when the company hit its lowest mark. After seeing what’s gone on over the last six weeks or so, it’s enough to make me wonder if things are turning around for Boeing. As such, I’m upgrading from bearish to neutral. Boeing will still face trouble in the months ahead, but things may finally be turning around for the aviation giant.

Investor Sentiment is Improving Somewhat as Well

Some have always expected Boeing’s fortunes to improve. Boeing has a Smart Score of nine out of 10 on TipRanks. That’s the second-highest level of “outperform” and also represents the second-highest Smart Score available. That suggests a high likelihood that Boeing will ultimately do better than the broader market.

Hedge funds are backing up this projection with eager assent, the TipRanks 13-F Tracker reveals. Hedge funds increased Boeing holdings by 148,100 shares last quarter. This is also the second consecutive quarter that hedge funds added to their Boeing holdings. Hedge funds made these additions while Boeing prices were in some of their most pointed declines back in late 2021 / early 2022.

Insider trading at Boeing has been a different story. The pattern is comparatively quiet, especially since the last informative trade came six months ago with directors Lawrence Kellner and Steven Mollenkopf’s purchases.

The last transaction of any sort was one sell transaction staged back in April. Meanwhile, a look at the previous 12 months for insider purchases shows 22 sell transactions and 18 buy transactions. That puts a slight weight on selling over the last 12 months.

As for retail investors, the trend is up but starting to turn negative. The number of TipRanks portfolios that held Boeing dropped 0.2% in the last seven days. However, that number is up 0.9% in the last 30 days.

Meanwhile, Boeing’s dividend history is a bit checkered. While it was a solid income investor pick three years ago, that’s much less the case today. Boeing hasn’t issued a dividend since February 2020, just before the worst of the COVID-19 pandemic kicked in.

Boeing Might be Starting to Take Off Again

There absolutely is good news to be had for Boeing right now. The potential defusing of a labor dispute is certainly welcome. It’s also welcome to hear that the FAA is giving Boeing a way to actually start selling Dreamliners again. Resurging demand—even with rising ticket prices—is further good news for aircraft manufacturers. Throw in a world that’s increasingly on a war footing, and that may only improve things for Boeing from there.

In fact, looking at all this good news in one place might actually make some optimistic about Boeing’s overall fate. The question that remains, however, is whether this good news will hold out.

The unfortunate problem about all of Boeing’s good news so far is that there’s an equal but opposite force of bad news waiting in the wings to potentially stymie it all.

Boeing puts out a new labor agreement! Great! Unless, of course, the union rejects it, and it’s off to the picket lines starting Wednesday.

Boeing gets the FAA’s nod to start inspecting, fixing, and potentially selling Dreamliners again! Terrific! Unless, of course, airlines start wondering if they really want to buy Boeing right now. Thankfully for Boeing, this matters less than one might think. Since Boeing’s primary competition is limited to basically Airbus (EADSY), anyone who would have switched probably already has.

Travel demand is coming back! Wonderful! Unless, of course, that turns on a heel as the macroeconomic environment right now limits the travel market. Pent-up demand is indeed hitting and hitting hard enough to mean good news for airlines. However, as prices at the gas pump and grocery store remain elevated, how much longer will that hold out?

Thankfully, Boeing isn’t just letting the good news ride. It’s already moving to improve its perception among the more environmentally conscious. It’s set to establish a research and development facility in Japan focusing on sustainable aviation fuel and electric aircraft development.

Hydrogen engines, robotics, and carbon fiber development are all on tap. These developments could pay off big for Boeing, as they’re not just useful in aircraft development.

These technologies could represent a major new income stream for Boeing, thanks to licensing deals. This would be an income stream that wouldn’t depend strictly on people’s ability or inclination to board a plane.

Wall Street’s Take on BA

Turning to Wall Street, Boeing has a Strong Buy consensus rating. That’s based on 11 Buys and three Holds assigned in the past three months. The average Boeing price target of $208.57 implies 25.5% upside potential.

Analyst price targets range from a low of $160 per share to a high of $281 per share.

Conclusion: A Great Run Today, an Uncertain Run Tomorrow

Don’t let these points detract too much from the main point. Boeing is having a great run right now. That’s why it’s up today. The only real question is, is Boeing’s run-up sustainable? That’s a bit doubtful, and that’s exactly why I’m neutral on Boeing.

Boeing’s run of great news could start to sour as early as Wednesday. However, it’s unlikely that Murphy’s Law will fully kick in for Boeing, especially after the last couple of years it’s already had.

Boeing should come out ahead in the short term. Especially thanks to all that good news. It also has a few irons in the fire that will give it further product line diversification if it all goes according to plan.

However, with a bit of bad news awaiting to potentially derail every bit of good news, being much more than Neutral on Boeing doesn’t look like a great idea.


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