Investing in Boeing Is a Flight of Fancy as It Struggles to Recover

Not too long ago, Boeing (NYSE:BA) stock was trading at more than $400. But since early 2019, BA stock has shed more than 50% of its value. The aerospace giant has been hit hard by multiple crises in the past year, significantly weakening its balance sheet and safety reputation.

Moreover, emerging competitors are looking to establish their position in the sector. These companies are hoping to finally end the duopoly held by Boeing and Airbus (OTCMKTS:EADSY).

The grounding of Boeing’s 737 Max airplane and the Covid-19 pandemic couldn’t come at a worse time for the company. Before the pandemic struck, it had been in a strong financial position and could have come out of the crisis relatively unscathed.

However, after Covid-19 obliterated the air travel industry, Boeing’s fundamentals took a hit. Moreover, it continues to cede market share to its rivals and faces new competition across the globe. Hence, challenging times are ahead for BA stock.

Boeing’s Dismal Third Quarter Results

A few months ago, Boeing posted a surprise profit in the second quarter. However, in the third quarter, it didn’t have the same luck, posting a much greater-than-expected loss. On top of that, it continues to burn cash at a worrying rate.

Boeing made $15.3 billion in sales in the third quarter, falling short of analyst estimates by $700 million. The defense and space segment led the way with $6.6 billion in revenue.

The company eked out a small profit of $59 million. But after considering $669 million in interest and debt expenses, it reported an adjusted loss per share of 60 cents.

Boeing’s commercial airplanes segment has been a thorn in its side for several quarters now. It posted a massive loss of $693 million in the third quarter. Lower delivery numbers for the 787 airplane were partially to blame for the drop.

Furthermore, Boeing burned a whopping $1.8 billion in cash during the quarter.  Though the actual free cash flow loss was $507 million, it includes a $1.3 billion tax refund from the previous quarter. If we remove that one-time benefit, we are looking at colossal cash burn, which is significantly higher on a sequential basis.

A Bleak Outlook for BA Stock

Boeing is in for an even rougher time as it looks for a major rebound with its business. After the 737 MAX debacle, Boeing has had to take up massive debt to bear the losses from its grounding.

Meanwhile, its main competitor, Airbus, has gained a sizeable amount of market share from Boeing in the aftermath. As of June, Airbus had more than 60% of backlogged aircraft orders.

Furthermore, both companies are now faced with new competition. Russia’s MC-21 aircraft deliveries will begin soon. China’s Comac C919 planes are working through regulatory obstacles, but could take off in the next few months. Hence, both Boeing and Airbus could lose a chunk of sales to these newcomers.

Moreover, the financial damage that Boeing has had to incur in the past couple of years is dumbfounding. For instance, its debt balance in 2018 was at $13.8 million, but by the conclusion of the third quarter this year, it had risen to $62.4 billion.

The Bottom Line On BA Stock

Boeing has faced a lot of adversity in the past couple of years, but its woes are far from being over. It has racked up an enormous debt load, and its top-line growth hasn’t been able to stop the bleeding.

On top of that, Boeing is burning cash at a troubling pace, which will continue to be a problem as it looks to turn things around. Hence, at this stage, BA stock is not an appealing investment.

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

Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.