Boeing (BA)

Underperform
Boeing is in for a bumpy ride. Its falling revenue and negative returns on capital suggest it’s destroying value as demand fizzles out. StockStory Analyst Team
Anthony Lee, Lead Equity Analyst
Max Juang, Equity Analyst

2. Summary

Underperform

Why We Think Boeing Will Underperform

One of the companies that forms a duopoly in the commercial aircraft market, Boeing (NYSE:BA) develops, manufactures, and services commercial airplanes, defense products, and space systems.

  • Sales stagnated over the last five years and signal the need for new growth strategies
  • Historically negative EPS raises concerns for risk-averse investors and makes its earnings potential harder to gauge
  • Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders
Boeing’s quality doesn’t meet our expectations. We’re looking for better stocks elsewhere.
StockStory Analyst Team

Why There Are Better Opportunities Than Boeing

Boeing is trading at $233.27 per share, or 33x forward EV-to-EBITDA. The current multiple is quite expensive, especially for the tepid revenue growth.

We prefer to invest in similarly-priced but higher-quality companies with superior earnings growth.

3. Boeing (BA) Research Report: Q1 CY2025 Update

Aerospace and defense company Boeing (NYSE:BA) fell short of the market’s revenue expectations in Q1 CY2025, but sales rose 17.7% year on year to $19.5 billion. Its non-GAAP loss of $0.49 per share was 62.4% above analysts’ consensus estimates.

Boeing (BA) Q1 CY2025 Highlights:

  • Revenue: $19.5 billion vs analyst estimates of $19.66 billion (17.7% year-on-year growth, 0.8% miss)
  • 737 production gradually increased in the quarter; still expected to reach 38 per month this year
  • Adjusted EPS: -$0.49 vs analyst estimates of -$1.30 (large beat)
  • Adjusted EBITDA: $1.06 billion vs analyst estimates of $594.9 million (5.4% margin, large beat)
  • "Our company is moving in the right direction as we start to see improved operational performance across our businesses from our ongoing focus on safety and quality"
  • Operating Margin: 2.4%, up from -0.5% in the same quarter last year
  • Free Cash Flow was -$2.29 billion compared to -$3.93 billion in the same quarter last year
  • Backlog: $544.7 billion at quarter end
  • Sales Volumes rose 56.6% year on year (-36.2% in the same quarter last year)
  • Market Capitalization: $122.3 billion

Company Overview

One of the companies that forms a duopoly in the commercial aircraft market, Boeing (NYSE:BA) develops, manufactures, and services commercial airplanes, defense products, and space systems.

Boeing began in 1916 when William Boeing founded Pacific Aero Products in Seattle, following his construction of the B&W seaplane. The company, renamed Boeing Airplane Company the following year, capitalized on the growing demand for military aircraft brought about by World War I, initially focusing on seaplanes. Over the decades, Boeing expanded its operations beyond military aircraft to become a leading producer of commercial jetliners. The company's aircraft designs and acquisitions of competitors and strategic partners, such as McDonnell Douglas in 1997, have played a crucial role in its growth. Boeing also ventured into space technology and advanced defense systems, marking significant diversification of its product lines.

Today, Boeing offers a range of products across its commercial and defense sectors. For the commercial market, Boeing designs and manufactures jet aircraft, including the 737 narrow-body and the 767, 777, and 787 wide-body models. These models are used by many well-known airlines such as Delta and American Airlines. If you’ve flown recently, there's a good chance you were in a Boeing model.

For the defense, space & security sector, Boeing produces manned and unmanned military aircraft and systems, including fighters, rotorcraft, and surveillance systems, alongside space and satellite technologies. Additionally, to complement its products the company offers support services, including maintenance, logistics, and data analytics, to both commercial and defense customers globally. These services provide aftermarket revenue for the company.

In terms of contracting, Boeing engages in both fixed-price and cost-type contracts. Fixed-price contracts, where the payment does not change regardless of the actual costs incurred, are common within the company, particularly in its defense segments. This contract type often applies to products and services with well-defined specifications, allowing Boeing to manage financial risks effectively. Conversely, cost-type contracts are used for projects that involve significant development and technical challenges, such as new aircraft designs or advanced defense systems. These contracts ensure Boeing is reimbursed for all allowable expenses to a set limit plus additional payment to allow for a profit, which is crucial for projects with high degrees of uncertainty and complexity.

Boeing also earns a significant portion of its revenue from U.S. government contracts, including those for the Department of Defense and other federal agencies. These contracts may involve Foreign Military Sales (FMS), where Boeing supplies military equipment and services to foreign countries with the U.S. government acting as an intermediary.

4. Aerospace

Aerospace companies often possess technical expertise and have made significant capital investments to produce complex products. It is an industry where innovation is important, and lately, emissions and automation are in focus, so companies that boast advances in these areas can take market share. On the other hand, demand for aerospace products can ebb and flow with economic cycles and geopolitical tensions, which can be particularly painful for companies with high fixed costs.

Boeing’s primary competitor is Airbus (OTC:EADSY), while other competitors in the aerospace industry include Lockheed Martin (NYSE:LMT), and Northrop Grumman (NYSE:NOC).

5. Sales Growth

Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Unfortunately, Boeing struggled to consistently increase demand as its $69.44 billion of sales for the trailing 12 months was close to its revenue five years ago. This was below our standards and is a sign of poor business quality.

Boeing Quarterly Revenue

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Just like its five-year trend, Boeing’s revenue over the last two years was flat, suggesting it is in a slump. Boeing Year-On-Year Revenue Growth

Boeing also reports its number of units sold, which reached 130 in the latest quarter. Over the last two years, Boeing’s units sold averaged 7% year-on-year declines. Because this number is lower than its revenue growth, we can see the company benefited from price increases. Boeing Units Sold

This quarter, Boeing’s revenue grew by 17.7% year on year to $19.5 billion but fell short of Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 26.1% over the next 12 months, an improvement versus the last two years. This projection is eye-popping for a company of its scale and implies its newer products and services will fuel better top-line performance.

6. Operating Margin

Although Boeing was profitable this quarter from an operational perspective, it’s generally struggled over a longer time period. Its expensive cost structure has contributed to an average operating margin of negative 8.6% over the last five years. Unprofitable industrials companies require extra attention because they could get caught swimming naked when the tide goes out. It’s hard to trust that the business can endure a full cycle.

On the plus side, Boeing’s operating margin rose by 5.7 percentage points over the last five years. Still, it will take much more for the company to show consistent profitability.

Boeing Trailing 12-Month Operating Margin (GAAP)

In Q1, Boeing generated an operating profit margin of 2.4%, up 2.9 percentage points year on year. This increase was a welcome development and shows it was more efficient.

7. Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Boeing’s earnings losses deepened over the last five years as its EPS dropped 18.6% annually. We tend to steer our readers away from companies with falling EPS, where diminishing earnings could imply changing secular trends and preferences. If the tide turns unexpectedly, Boeing’s low margin of safety could leave its stock price susceptible to large downswings.

Boeing Trailing 12-Month EPS (Non-GAAP)

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Boeing, its two-year annual EPS declines of 43.6% show it’s continued to underperform. These results were bad no matter how you slice the data.

In Q1, Boeing reported EPS at negative $0.49, up from negative $1.13 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street is optimistic. Analysts forecast Boeing’s full-year EPS of negative $19.74 will reach break even.

8. Cash Is King

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Boeing’s demanding reinvestments have drained its resources over the last five years, putting it in a pinch and limiting its ability to return capital to investors. Its free cash flow margin averaged negative 8.8%, meaning it lit $8.76 of cash on fire for every $100 in revenue.

Taking a step back, an encouraging sign is that Boeing’s margin expanded by 14.8 percentage points during that time. We have no doubt shareholders would like to continue seeing its cash conversion rise.

Boeing Trailing 12-Month Free Cash Flow Margin

Boeing burned through $2.29 billion of cash in Q1, equivalent to a negative 11.7% margin. The company’s cash burn slowed from $3.93 billion of lost cash in the same quarter last year.

9. Return on Invested Capital (ROIC)

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Boeing’s five-year average ROIC was negative 27.2%, meaning management lost money while trying to expand the business. Its returns were among the worst in the industrials sector.

Boeing Trailing 12-Month Return On Invested Capital

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Boeing’s ROIC has increased. This is a good sign, but we recognize its lack of profitable growth during the COVID era was the primary reason for the change.

10. Balance Sheet Risk

As long-term investors, the risk we care about most is the permanent loss of capital, which can happen when a company goes bankrupt or raises money from a disadvantaged position. This is separate from short-term stock price volatility, something we are much less bothered by.

Boeing burned through $12.67 billion of cash over the last year, and its $53.62 billion of debt exceeds the $23.67 billion of cash on its balance sheet. This is a deal breaker for us because indebted loss-making companies spell trouble.

Boeing Net Debt Position

Unless the Boeing’s fundamentals change quickly, it might find itself in a position where it must raise capital from investors to continue operating. Whether that would be favorable is unclear because dilution is a headwind for shareholder returns.

We remain cautious of Boeing until it generates consistent free cash flow or any of its announced financing plans materialize on its balance sheet.

11. Key Takeaways from Boeing’s Q1 Results

We were impressed by how significantly Boeing blew past analysts’ EBITDA and EPS expectations this quarter, signaling improved profitability. On the other hand, its revenue slightly missed. Still production of the company's signature 737 planes remains on schedule. Overall, we think this was a solid quarter with some key areas of upside amidst low expectations. The stock traded up 3.5% to $168.08 immediately following the results.

12. Is Now The Time To Buy Boeing?

Updated: July 27, 2025 at 11:04 PM EDT

Before making an investment decision, investors should account for Boeing’s business fundamentals and valuation in addition to what happened in the latest quarter.

Boeing doesn’t pass our quality test. First off, its revenue growth was weak over the last five years. And while its rising cash profitability gives it more optionality, the downside is its relatively low ROIC suggests management has struggled to find compelling investment opportunities. On top of that, its declining EPS over the last five years makes it a less attractive asset to the public markets.

Boeing’s EV-to-EBITDA ratio based on the next 12 months is 33x. This valuation tells us it’s a bit of a market darling with a lot of good news priced in - we think there are better stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $240.08 on the company (compared to the current share price of $233.27).