Boeing Stock: Should You Buy, Sell, or Hold Ahead of Earnings

Key Points

• Boeing stock might be gearing up for an earnings rally this week, with a few fundamental and technical factors turning bullish.
• Resolving strikes could help Boeing move closer to monetizing its $515 billion backlog of orders, which would boost the stock's valuation.
• Markets are willing to pay a premium, and Wall Street analysts see further double-digit upside for Boeing coming up.

When earnings season comes around, pockets of volatility can be exploited during financial releases as long as investors get the direction of the stock right during the release. Ideally, positionings will be made before the reports are out, using the right indicators and gauges to determine the probabilities of an up move versus a selloff.

This week, investors can consider shares of Boeing Co. NYSE: BA. The company will announce its coming quarterly earnings results, and the stock has been under pressure due to faltering financials, and machinist strikes hurting the inventory backlog of airplanes to be manufactured. However, the aerospace and defense sector doesn’t have many other players besides Boeing to run to.

Names like Airbus OTCMTKS: EADSY, Lockheed Martin Co. NYSE: LMT, and even Northrop Grumman Co. NYSE: NOC can be compared against Boeing for investors to gauge where markets are betting the stock might be headed in the coming days and after the company reports its quarterly earnings results. Based on these factors, here’s whether Boeing stock is a buy, sell, or hold ahead of earnings.

Key Factors Driving Boeing Stock Lately

Some of the Key Performance Indicators (KPIs) should be considered for Boeing stock so investors can gauge where their thesis could land. Starting with backlogs, Boeing has reported a rising backlog of orders up to a current valuation of $518 billion, which will eventually be turned into revenues and earnings.

Some of this backlog increase is due to the fact that China’s economy is coming back online, especially now that the nation is implementing more stimulus measures to rescue its faltering economy. A Boeing press release estimates that China’s air traffic is set to rise by 5.2% a year until 2030, a trend that Boeing is set to exploit.

This measure is enough to bring the stock to new highs, yet it is now trading at only 58% of its 52-week high, showing a significant disconnect between the fundamental drivers and the recent price action. Now, this might be for a reason, creating bearish pressure in future prices to justify, or it might be a profit opportunity.

Having demand in the backlog is one thing, but delivering on these orders is another entirely, and the company’s earnings and valuation are dependent on them. The current strike situation is not helping these new orders be realized, so perhaps that’s one reason the stock has yet to recover.

In a recent attempt to tame the new strikes, Boeing has landed on a 35% wage hike proposition for their machinist workers, looking to get these issues over with and resume production so that new orders may be produced and delivered to raise the company’s outlook from Wall Street moving forward.

Wall Street’s Outlook on Boeing Stock

Investors need to understand that when Wall Street analysts decide to rate a stock, a major factor typically comes into play: momentum, which results from sentiment for that company. Knowing this, investors should place additional weight on any bullish rating and valuation for Boeing stock today, considering how poorly it's performed.

Starting with the consensus price target of $198.8 a share, which calls for a 28.3% upside from where the stock trades today, investors can use this initial view as a benchmark to evaluate other potential valuations and outlooks.

Leading the way as an outlier, there are those at Susquehanna who see Boeing stock valued as high as $210 a share today, daring it to jump by as much as 35.5% from today's stock price for a major recovery if and when the strike issues can be resolved.

In a recent press release, Boeing management stated that they will cut out 10% of the entire workforce in the coming weeks, sort of "trimming the fat" from costs to give net profits more room to breathe. While these layoffs' effects are unclear yet, markets do have a good idea of what could happen by earnings day.

Compared to peers like Lockheed Martin and Northrop Grumman, who give the industry an average valuation of 22.0x on a forward P/E basis, Boeing is commanding a premium for all the right reasons. Boeing trades significantly above the industry at 45.3x forward P/E, when markets typically overpay for the stocks they think will outperform shortly.

More than that, new institutional buyers have been heading toward Boeing stock recently. As of October 2024, those at Raymond James decided to boost their holdings in Boeing stock by 2.5%, netting their investment at $151 million today. Timing the purchase before earnings are announced tilts expectations to the bullish side.