Boeing Will Deliver Q1 Earnings While At Center Of Air Safety Scandal: 'Everybody Wants Boeing To Succeed' (CORRECTED)

Author: Natan Ponieman | April 22, 2024 05:33pm

Editor’s note: This story has been corrected to reflect that Boeing reports earnings premarket Wednesday.

As the market awaits Boeing Co's (NYSE:BA) earnings call this week, investors are wondering whether the company's results will be strong enough to counter recent scandals hunting the company's public image.

The aircraft manufacturer will release its results premarket Wednesday.

Boeing is facing major criticism over safety concerns that sprouted several federal investigations and are eroding investor trust in the company.

Boeing has become among the most volatile stocks in the aerospace and defense sector, with its shares dropping 32.5% since January, after an aircraft made by the company lost a part of its fuselage. 

Before the drop, Boeing's stock grew around 47% between late October and mid-December.

By contrast, iShares US Aerospace & Defense ETF (BATS:ITA), the largest ETF in the sector by total assets, is up 2.3% since January and 11% in the past year. About 13% of the fund's assets consist of Boeing stock.

Invesco Aerospace & Defense ETF (NYSE:PPA), which has 6% of its assets allocated to Boeing, has performed even better, and is up 8.7% since January and 22% in the past year.

Airbus SE (OTC:EADSY), Boeing's main competitor in the commercial aviation market, has benefited from Boeing's downfall, and its shares are up 12% since January and 22% in the past year.

Read also: Boeing Wants To Make Flying Cars In Asia While Aircraft Unit Faces Severe Turbulence

Analysts Weigh In On Boeing

On Monday, Barclays analyst David Strauss maintained Boeing's rating (NYSE:BA) with an Equal-Weight but lowered the company's price target from $235 to $190.

According to a Zacks analysis, the recent increase in research and development expenses and a decrease in aircraft deliveries are likely to negatively impact the company’s performance in the upcoming earnings call.

The company sold 40% fewer 737 planes than the same period last year. Overall, commercial airplane sales were down by 36.2%.

However, stronger sales in the 767 and 787 segments, which generate more revenue per plane, could offset the 737 slump.

Consensus earnings per share forecast for Q1, ahead of the report, is $-1.43, according to Zacks, based on nine analysts’ forecasts. EPS for the same quarter last year was $-1.27.

Boeing's Legal Woes, Safety Scandals During 2024

Boeing's recent history has been plagued with controversies which include several federal probes, the resignation of its CEO and the suspicious death of a whistleblower.

The company has been subject to at least 32 whistleblower complaints in the past three years.

In January, a Boeing 737 Max 9 flown by Alaska Air Group, Inc. (NYSE:ALK) lost an emergency door mid-flight, terrifying passengers and sparking widespread concerns about the company's responsibility for the incident.

The Department of Justice launched a criminal investigation and the company is facing lawsuits from several passengers on the flight.

The event was a blow to the company's 737 Max line, which had already faced severe actions from the FAA after two 737 Max 8 aircraft crashed in similar conditions during 2018 and 2019, costing 346 lives.

The incident triggered a domino effect that damaged the company's public image in the following months.

737 Max 9 planes were blocked from flying by the FAA for about two weeks until the agency allowed them to get back in the air. FAA Administrator Mike Whitaker however, said “this won’t be back to business as usual for Boeing.” 

The turbulence continued into March when the FAA’s audit found the company deficient in 33 of 89 review points.

Ed Clark, the head of the company's 737 Max division resigned, which was followed by the announcement that the company's CEO Dave Calhoun will leave his post by the end of the year.

Last month, John Barnett, a former Boeing employee who raised safety concerns after being at the company for over 32 years, was found dead in a hotel room from self-inflicted wounds. Barnett had testified as a witness against Boeing and was set to return to court days after his death.

In parallel to the FAA's audit, the National Transportation Safety Board has announced a public hearing into the company, which will be conducted in August.

Boeing Could Get Into Even More Trouble With DOJ 

Last week, a Senate committee held a hearing which examined Boeing's safety issues. Sen. Ron Johnson (R-WI) said, "everybody wants Boeing to succeed."

The committee brought back into the spotlight a deal the company reached with the Department of Justice in 2021, on several charges of fraud. After the crashes of 2018 and 2019, Boeing admitted having withheld critical information about technical aspects of its aircraft.

This led to a deal that had Boeing pay $2.5 billion in penalties. Now, senators say the company could have broken the terms of the deal after the NTSB failed to receive key documentation from Boeing on the construction of the aircraft that failed in January.

A DOJ probe is currently investigating whether the deal was broken. If Boeing is found guilty, the department could impose further fines, and potentially affect the company's ability to land new contracts with the U.S. government, according to Reuters.

Now read: Boeing Heads To Space: Could NASA Deal, Starliner Help Fend Off Airplane Segment Weakness?

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