Reports Q1 2020 results on Wednesday, April 29, before the market opens
Yield forecast: $ 17.26 billion
EPS expectation: $ -2.01
The past is no longer relevant to Boeing (NYSE :). When the Chicago-based aviation giant publishes its first-quarter results tomorrow, investors will want to know just one thing: Does the world's biggest plan maker have a survival plan in a world where the demand for travel is declining dramatically?
The unprecedented situation as a result of the COVID-19 pandemic has almost caused the aviation industry to collapse. About 44% of the planes are currently stored according to data provider Cirium, while travel demand has collapsed – down 90%. And with more than 3 million cases of coronavirus reported worldwide, there is no clear timeline for when planes return to heaven and when airlines start buying planes again.
Crisis unlike anything the company has ever experienced
Indeed, global airline sales are expected to drop $ 314 billion this year, according to an industry trade group, and travel may not fully recover until the mid-decade. That blow forced Boeing to keep cash and possibly seek a government bailout soon.
But before that happens, Boeing needs to come up with a restructuring plan that could involve massive layoffs, abandon some business units, and drastically reduce aircraft production.
Last Friday, Boeing walked away from a $ 4.2 billion plan to combine its jetliner business with Embraer SA (NYSE 🙂 from Brazil. In addition, Boeing is expected to cut Dreamliner's production by about half as the effort brought in a record amount of cash in the first quarter.
"The health crisis is unlike anything we've ever experienced," CEO David Calhoun told shareholders yesterday. "It will take years for this to return to pre-pandemic levels." Consulting firm Roland Berger estimates that the demand for new aircraft may drop by nearly half if the pandemic forces airlines to hold a large portion of their fleet on the ground for six months.
In anticipation of a long and painful recovery, investors have already dumped Boeing shares. Boeing was trading at $ 127.81 at the time of writing and has lost 60% of its value this year, making it the worst performer on the 30-component index.
The plunge of the stock began last year when the company's flagship 737 MAX aircraft was involved in two fatal accidents, forcing regulators around the world to have the company's main revenue earner paid. The plan make is still struggling to repair the faulty plane and get the regulatory approvals needed to resume operations.
With much of the aviation industry facing an existential threat after the pandemic, it is important to save money. When that happens, it will be a positive thing for Boeing, as that could be a sinking stock and open the door for a government bailout.
Bottom Line
Because airline airlines struggle for survival and are unable to order or even use new aircraft, Boeing has little choice but to drastically reduce its personnel and production. Investors will likely see this plan take shape in tomorrow's earnings release. That plan also determines the health of the manufacturer and its position in the aviation industry. Boeing will undoubtedly be much weaker than before, making the company much more vulnerable than before the pandemic.
