Boeing stock had a challenging month of September, and it doesn’t appear that October will be any better. However, this drop in stock value might present an opportunity for investors to consider.
Throughout September, Boeing shares only experienced gains on three out of the 21 trading days. During this past month, Boeing’s stock price declined by more than 14%, while the broader market represented by the S&P 500 decreased by approximately 5%.
It’s essential to note that this significant decline in stock value was not due to any negative developments within the company itself. In fact, there were some positive news events for Boeing in September. The company secured orders from a Vietnamese airline, and it also announced that the demand for aircraft in China is expected to exceed initial projections.
However, it’s worth mentioning that Boeing wasn’t the only company affected by the market downturn. Airbus’ U.S.-listed American depositary receipts also experienced a decline of about 9%. Furthermore, RTX stock fell by approximately 16%, primarily due to issues with its geared turbofan engine powering specific A320 family jets. Unfortunately, this engine’s reliability hasn’t met initial expectations.
J.P. Morgan analyst Seth Seifman commented on Boeing’s stock decline, noting that while the magnitude and consistency of the decrease are noteworthy, the drop itself was to be expected. Seifman cites several headwinds to third-quarter earnings and cash flow, alongside slower-than-anticipated 737 deliveries, and potential pressure on free cash flow expectations for 2024.
When considering Wall Street projections, it is predicted that Boeing will report a per-share loss of around $2.66 for the third quarter, with free cash flow estimated at just $100 million. Contrastingly, at the beginning of September, these figures were projected to be a loss of 66 cents per share and approximately $500 million in free cash flow, respectively, according to FactSet.
One contributing factor to these revised projections is the relatively low number of jet deliveries by Boeing in July and August, which totaled 78. Delivery data for September is not yet available. Wall Street estimates that approximately 137 planes were delivered in the third quarter, implying 59 deliveries in September alone. This volume is considerably higher than Boeing’s average monthly delivery rate of around 43 jets throughout this year.
While Boeing’s recent stock performance may be concerning to some, it’s crucial for investors to analyze this situation thoroughly in order to make informed decisions regarding their investment strategies.
Falling Estimates and Investor Concern
Falling estimates are a significant challenge for any stock, and this holds true for Spirit AeroSystem (SPR). Investors are particularly concerned about the company’s ability to support higher deliveries of 737 MAX jets, a key aspect of their business. Consequently, Spirit AeroSystem’s shares experienced a significant drop of 24% in September.
Analyst Outlook and Price Target
Despite these challenges, one analyst remains optimistic about Spirit AeroSystem’s future. The analyst explains that their multiyear outlook remains unchanged, making the stock more attractive at its current value of approximately $190. The analyst projects substantial growth in free cash flow for the years ahead, estimating $3.8 billion in 2023, $6.2 billion in 2024, and an impressive $10.8 billion in 2025.
Given this positive outlook, the analyst rates the company’s shares as a Buy, with a target price of $245.
Analyst Ratings and Price Targets Compared
In general, 59% of analysts covering the company also rate its shares as a Buy. This rating exceeds the average Buy-rating ratio for stocks in the S&P 500, which stands at approximately 55%. Furthermore, the average analyst price target for Boeing is around $256, representing a notable 37% increase from its recent levels. It is necessary to mention that at the beginning of September, Boeing stock was within about 15% of its target price.
Looking Ahead: Demonstrating Growth
Although Boeing’s stock has experienced a 2.3% decline in Monday trading, this setback is not unexpected for stocks that have undergone a drop. Now, the key challenge for Boeing is to demonstrate that its production and deliveries can experience growth in the upcoming months.
CEO Change and Market Impact
The recent news of Spirit Aero’s CEO replacement may have had an impact on the company’s shares. Patrick Shanahan, a board member, has been appointed as the interim President and Chief Executive Officer, effective immediately. This change follows the resignation of Thomas Gentile, who also served as a board member.
Unsurprisingly, this announcement has had a positive effect on Spirit Aero’s stock, causing it to rise by 4.5% in late trading on Monday.