Boeing (NYSE:BA) stock seems to be stabilizing after taking a hammering in the past couple of years.
Boeing ticked up roughly 5% in the past month and is building a decent head of steam. The company could potentially have two of its aircraft programs back in business and launch another one this year. We could see the much-awaited resurgence in Boeing this year.
BA stock’s negative run started a year before the pandemic engulfed proceedings. This was around the second 737 Max disaster, which pulled down the stock by more than 17%. However, shares tanked over 70% when the pandemic hit, hitting a low of $89 in March 2020. Fast forward today, the stock is still trading 25% lower than its 52-week high.
Nevertheless, the company has been moving in the right direction with improved cash flows and operating profit in the past couple of quarters. Moreover, Boeing has made significant progress in eliminating the regulatory roadblocks that hampered the 737 Max’s return. BA stock is ever so close to the buy zone.
Back In Business
The beleaguered 737 Max aircraft was grounded in March 2019 after two fatal crashes. The human tragedies took the lives of over 300 people and were a massive blow for Boeing’s business, with thousands of orders on its books.
However, after one and a half years of rigorous testing and collaboration with mechanics, expert engineers, scientists, NASA and other entities, the 737 Max is flying again. The top aviation safety agencies in the U.K., U.S., Canada, and the EU all recertified the aircraft. Airliners and Boeing have been instructed to make necessary adjustments to flight control systems. Moreover, they have also been instructed to update operational manuals and improve the quality and quantity of pilot training.
China’s aviation safety agency recently issued an airworthiness certificate for the 737 Max. The aircraft will take to the skies after a three-year stretch in the country. Getting the green light in China was crucial considering its second-largest market for commercial air traffic globally. However, it’s just the initial step towards the comeback in China. Airlines will be required to analyze the aircraft’s modifications, the pilot’s ability, and other related elements.
Outlook
With the 737 Max greenlit by most aviation safety agencies, it’s now time for Boeing to ramp up deliveries. Boeing had record deliveries of the 737 Max in the previous quarter and will end the year with over 340 deliveries.
Looking ahead, the first half is likely to be sluggish due to the required rework. However, deliveries are likely to improve significantly when summer comes along. Ramping up deliveries will provide Boeing with the much-needed cash flow it needs at this time.
There’s also the resumption of 787 deliveries this year. However, Boeing has been coy about predicting 787 deliveries’ resumption without the FAA’s approval. The FAA needs to approve rework and inspection procedures pertaining to fuselage issues.
Moreover, you also talk about a potential successor to the 737. There are reports that it could launch a mid-market jet in 2023 to counter the growing popularity of Airbus’s (OTCMKTS:EADSY) A321neo.
The Bottom Line on BA Stock
The going has been incredibly challenging for Boeing in the past three years. However, it seems it is carving its path to recovery with considerable success and could rebound this year.
The recertification of the 737 Max aircraft across the globe will enable Boeing to push on and significantly improve its top and bottom lines. Moreover, with the approval of the 787 on the cards, it could have the winning formula which could bring back its glory days.
BA stock isn’t a buy yet, but it’s fast approaching there.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
