Boeing BA shares had been on a bit of a decline before the deadly Ethiopian Airlines crash involving the aerospace power’s 737 MAX aircraft. Despite the deadly incident and the current investigation into the cause of the Ethiopian crash, Boeing stock remains a strong buy and its shares popped over 1.2% Monday on the back of some seemingly positive news.
A Boeing 737 MAX aircraft crashed shortly after takeoff on March 10, which killed all 157 people on board. Similarities to an October Lion Air crash of the same new Boeing model led to the grounding of 737 MAX planes. There is currently an investigation underway into the cause of the accident. Investors should note that Boeing met with American Airlines AAL, Southwest Airlines LUV, and United Airlines UAL over the weekend in order to review software upgrades for the 737 MAX fleet, according to multiple reports.
Boeing plans on meeting with regulators and other key players in the coming days to discuss the next steps of the aircraft that the firm has said it has “full confidence in.” Nonetheless, BA on March 13 “determined—out of an abundance of caution and in order to reassure the flying public of the aircraft’s safety— to recommend to the FAA the temporary suspension of operations of the entire global fleet of 371 737 MAX aircraft."
Meanwhile, Ethiopian Airlines’ chief executive recently said that his company still has faith in BA despite questions over the safety of its 737 MAX. “Let me be clear: Ethiopian Airlines believes in Boeing. They have been a partner of ours for many years,” Ethiopian Airlines CEO wrote in a statement.
The chief executive also noted that his company is working with investigators in Ethiopia, the U.S., and elsewhere to find out what went wrong. On top of that, Tewolde Gebremariam seemed to rebuke some reports that said its pilots were unprepared to fly Boeing’s 737 MAX . “Contrary to some media reports, our pilots who fly the new model were trained on all appropriate simulators,” Tewolde said.
Clearly, there is still uncertainty surrounding the incident. But shares of BA popped 1.2% to roughly $366 per share through morning trading Monday, which represented an 18% downturn from its 52-week high of $446 a share. Meanwhile, other Dow giants, including Caterpillar CAT and Home Depot HD, saw their stock prices jump as well.
We can also see that the Chicago-based firm has crushed its peer group over the last three years. This group includes European rival Airbus EADSY, and Lockheed Martin LMT, Northrop Grumman NOC, and General Dynamics GD.
Looking ahead, Boeing provided new commercial jet delivery guidance between 895 and 905 fro 2019, which would blow away 2018’s previous record of 806. Boeing also said that its Dreamliner jets have remained in high demand from the likes American Airlines and United Airlines.
Meanwhile, Boeing’s Q1 2019 revenue is projected to pop 8.3% to reach $25.32 billion, based on our current Zacks Consensus Estimate. This would fall short of Q4’s 14% expansion, but investors should remember that Boeing soared well above our fourth-quarter estimate. Plus, Boeing’s full-year 2019 revenues are projected to climb 9.9% to $111.16 billion.
At the bottom of the income statement, Boeing’s adjusted Q1 earnings are expected to surge 16.8% to reach $4.25 a share. Better yet, the company’s Q2 EPS figure is projected to skyrocket nearly 45%, with full-year earnings expected to climb 25.7%. And the company has seen zero negative earnings estimate revision activity since the Ethiopian Airlines crash. This helps signal that analysts don’t expect the incident to have any material impact on Boeing’s earnings—at least at this time.
The chart below shows that Boeing’s earnings estimate revision activity has been pretty positive over the last 60 days, especially for fiscal 2019 and 2020.
Boeing currently sports a Zacks Rank #1 (Strong Buy) based in large part on its positive earnings revision activity. BA also rocks a “B” grade for Growth and raised its Q1 2019 dividend payout by 20% to $2.055 a share, up from $1.71 a share last year.
Furthermore, Boeing stock is trading at 17.4X forward 12-month Zacks Consensus EPS estimates. This marks a discount compared to its two-year high of 30.6X and its two-year median of 20.1X and helps us see that BA’s valuation appears solid. In the end, BA remains a stock worth considering, and the recent selloff might even make it more attractive.
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