The shares of Boeing (NYSE: BA) currently trade 35% below pre-Covid levels – losing almost $67 billion in market capitalization due to MAX groundings and the pandemic. Interestingly, the company reported $18 billion and $3.8 billion of operating cash burn last year and in H1 2021, respectively. Moreover, the high cash burn figures have largely been due to the build-up of inventories and other working capital changes. While weak near-term demand due to the pandemic is likely to weigh on the company’s financials, Trefis believes that the 4% annual growth in global passenger traffic in the next two decades is likely to assist shareholder returns. We highlight the historical trends in revenues, earnings, and stock price in an interactive dashboard analysis on Boeing Valuation.
Segment-wise long-term trends
Before the pandemic and MAX’s grounding, Boeing’s Commercial Airplanes, Defense, and Global Services segments contributed 57%, 26%, and 17% of total revenues, respectively. For the five-year period from 2013 to 2018, the company’s top line observed a CAGR of 3% – fairly in-line with the long-term trends in global passenger traffic. Our article, Are Long-Term Trends In Favor Of Boeing Stock?, highlights the key aspects of Boeing’s Commercial Market Outlook. Moreover, the company’s Defense and Global Services segments have also been expanding at a low single-digit rate in the past few years. Coming to profitability, the Commercial Airplanes, Defense, and Global Services segments’ operating profit margin was 14%, 6.5%, and 15% in 2018, respectively. Considering the high revenue contribution and profitability of the Commercial Airplanes segment, recovery in air travel demand is key to long-term gains in Boeing stock.
How did Boeing perform in H1 2021?
In H1 2021, Boeing reported $32 billion of revenues, 12% growth over the prior-year quarter – assisted by improving commercial airplane deliveries. The company generated $940 million of operating income and burned $3.9 billion of cash from operations – mainly from working capital changes. Given the positive trends in air travel demand and FAA’s approval of MAX aircraft, the company expects MAX’s production to reach 31 units per month by early-2022 from 19 per month at present. However, the inventories stand high at $82 billion – weighing on the balance sheet until 450 planes in the warehouse get delivered. (related: Pick Boeing Stock Over Northrop Grumman For Near-Term Gains)
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