Where Will Boeing Be In 3 Years?
Crystal balls are said to be useful items — but very hard to come by for investors. For better or worse, investors in Boeing (NYSE: BA) stock have something very close to a crystal ball: Hard numbers, laid out by management and by Wall Street analysts, telling us where Boeing stock will be in three years.
Are you planning to invest in one of the two biggest airplane manufacturers in the world, and intending to own it for the long term, rather than simply trading in and out of the stock? If so, it’s probably a good idea to at least consider these numbers before making your decision.
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Boeing reported its third-quarter earnings late last month. The news wasn’t great: A 1% decline in sales to $17.8 billion, negative operating profits, and a $6.2 billion net loss on the bottom line.
This confirms that after three straight years of steady growth as Boeing emerged from the pandemic slowdown in air travel, Boeing sales are shrinking once again. Worse, the aerospace giant appears to be heading for its sixth straight year of negative profits. Over the last 12 months, Boeing’s net loss totals $8 billion — its worst loss ever since the first year of the pandemic.
Admittedly, a big chunk of Boeing’s loss is attributable to a one-time event, the company’s fourth-longest-ever labor strike, which contributed about $4 billion to losses in Q3.
This strike of course is now at an end, but not without consequence for Boeing. In addition to any sales lost during the labor stoppage, Boeing had to postpone introduction of one airplane (the 777X) and shutter production of another (the 767 Freighter) in order to preserve cash during the strike. The company announced plans to take on loans and issue up to 170 million new shares to raise additional cash.
At current high interest rates, this will increase Boeing’s payments on its debt, at the same time as the new shares dilute any profits shareholders earn in future years — by as much as 27.5%.
On top of all that, Boeing had to agree to raise its machinists’ salaries by 38% over the next four years, in order to convince them to end the strike, adding to its overhead costs and further draining profits.
The good news is that with the strike behind it, and a mountain of cash generated by its borrowings and share sales, Boeing will survive. The bad news is that the company will probably be a lot less profitable going forward.
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