Financial Woes Won’t End For BA Stocks, But It Means An Opportunity

Boeing (NYSE:BA) is still in financial trouble, even though it is re-delivering the 737 Max that caused so many problems last year. Boeing also recently announced another non-GAAP operating profit for its final quarter. However, BA’s shares are still drifting and its outlook is not that good, at least for the next few quarters.

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In fact, the stock has yet to recover its March 12 peak to $ 269.19. At the close on Nov. 2, it stood at $ 212.77 per share, down slightly from the start of the year (YTD). Indeed, the shares closed at $ 214.06 on December 31, giving the name a cumulative performance of -0.60%.

Here’s what you need to know about BA stocks going forward – and why you should consider accumulating stocks.

BA Stock: Where are we at?

On October 27, Boeing reported that while its third-quarter revenue grew 8% year-over-year (YOY), its GAAP operating profit was $ 329 million. That’s up from a loss of $ 401 million last year and the second straight quarter of operating income reporting. However, that was the extent of the good news.

The bad news is that, on a non-GAAP basis, Boeing’s “core operating results” were only $ 59 million. This equates to a basic operating margin of just 0.40%.

In addition, all other digits below this line were negative (page 13). For example, the net income was a loss of $ 132 million. Likewise, operating cash flow was negative $ 262 million.

Admittedly, these figures are much better than a year ago. For example, last year’s operating cash flow was negative $ 4.8 billion.

Nevertheless, the free cash flow (FCF) was negative $ 507 million (Page 2). This money consuming performance is actually worse than it looks. That’s because the numbers were upped by a one-time income tax refund of $ 1.3 billion, which is unlikely to happen again. In other words, the adjusted FCF is actually negative by $ 1.8 billion.

No doubt, it’s depressing. This implies that this business could burn $ 7.2 billion per year. Boeing had $ 20 billion in cash and marketable securities, so it could potentially burn off a good chunk of that cash over the next year if sales and operating cash flow do not improve. .

The problem with Boeing

So what’s the biggest problem hindering Boeing and BA’s actions?

On the one hand, many airlines are still reluctant to take delivery of the 737 Max airliner as well as the 787. This is despite the fact that the Federal Aviation Administration (FAA) has approved the aircraft for airworthiness.

As Reuters recently reported, the 737 Max and 787 are integral to Boeing’s ability to bounce back from both the pandemic and the corporate safety scandal. Since FAA approval to return the 737 Max to service in November 2020, Boeing has delivered more than 195 aircraft. In addition, the airlines have come back ”more than 200 aircraft previously immobilized in service.

However, the 787 has not yet been delivered. The company only produces two planes per month so far, due to structural flaws. Boeing has twice halted 787 deliveries, with the last shutdown underway since May. This resulted in an inventory of more than 100 jets worth $ 9 billion, according to Reuters.

No more problems in space

These interruptions aren’t the only thing plaguing Boeing, however. On the contrary, the company’s space program also experienced more delays with its Starliner transport vehicle. After an unsuccessful attempt in December 2019 to ferry the capsule to the International Space Station (ISS), the vehicle was unable to return to space successfully.

Mainly, the capsule was sidelined by 13 stuck thruster valves, which Boeing was only able to take off recently. NASA and Boeing are target the first half of 2022 to start the reprogrammed test flight. It was after that the company also had to postpone an August 2021 flight.

In fact, the only potential bright spot for Boeing’s space division at the moment is its recent investment in a spin off of Galactic Virgo (NYSE:SPCE) called Virgin orbit. The company plans to go public through a Special Purpose Acquisition Company (SPAC). This adds a positive point for the BA share.

What to do with BA Stock

At this point, Boeing needs some sort of success, whether it’s financially, in commercial aerospace, or in its space division. Until then, BA shares will likely continue to flounder.

However, if the company can bounce back, value investors might want to start recovering stocks now. This is exactly what adversaries do: they look at a company’s problems and try to decide if the problems are fatal. Otherwise, the stock price will tend to reflect mostly bad news, but will be mostly cheap in the long run.

By following this reasoning – and by believing that Boeing’s aircraft and space divisions will eventually recover – financial performance should follow. Therefore, this might be a good time for value-oriented investors and nonconformists to start hoarding stocks.

As of the publication date, Mark R. Hake does not hold any position (direct or indirect) in any of the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to the publication guidelines of InvestorPlace.com.

Mark Hake writes about personal finance on mrhake.medium.com and run the Total Value of Return Guide that you can consult here.

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