* Reports Wednesday, April 24, before the opening
* Revenue Expectation: $ 23.08B
* EPS: $ 3.25
Boeing Co. (NYSE 🙂 is still recovering from one of the worst crises in his company history after two fatal accidents with his best-selling aircraft. But the US aviation giant will have another chance next week to calm alert investors when it comes out on Wednesday, April 24.
Shareholders will want to know what impact the global basis of its 737 MAX jetliner has had on the company's earnings momentum and long-term growth plans after the two fatalities forced the company to reduce 737 production by 19% within five months and constitute a commission to review the design and development of its aircraft.
The stakes are high for both Boeing and the US economy. The 737, which first entered service in the late 1960s, is the best-selling model of the aerospace industry and Boeing & # 39; s top earner. The newly developed MAX version was so successful that it attracted more than 5,000 orders worth more than $ 600 billion, including aircraft that have already been delivered, according to data from Bloomberg.
Deposits of 737 MAX orders last year boosted Boeing's turnover above $ 100 billion. That drove the market-based capitalization of the Chicago-based company to more than $ 250 billion for the Ethiopian Airlines crash last month, the second after the fatal incident in October that also involved the 737 MAX, which was carried out by Lion Air in Indonesia.
The 737 MAX is Boeing & # 39; s largest contribution to product income and interest before interest and taxes (EBIT), according to Goldman Sachs estimates, with the potential to make 45% of Boeing's EBIT over the next five years .
According to Credit Suisse, a combination of negative developments could damage Boeing's cash flows this year by $ 3.7 billion, or about a quarter of the bank's cash flow forecast.
No rapid return to normality
One of the most important questions that Boeing executives must answer during the conference call is how long it takes for the company to return to its normal operational capacity. The answer, however, depends on closing multiple questions in different jurisdictions, Boeing's ability to quickly release the software fix and lifting a global ban on 737 MAX.
In our opinion, a rapid return to normal activities seems highly unlikely. Boeing technicians are still working on a software update for a stall prevention system in connection with both the Lion Air and the Ethiopian Airlines disaster. However, a silver lining for the Boeing shares and its investors is that the company has averted a worst-case scenario with different causes for each of the two crashes, where the engineers still struggled to find the technical solution.
However, we do not see Boeing's shares regaining its lost ground in 2019 because disruptions to the 737 MAX deliveries are ongoing and investors will not get much clarity, not even in the upcoming profit call. Boeing shares have fallen nearly 10% since the Ethiopian Airlines crash on March 10, closing yesterday's session at $ 381.72
This year Boeing will also have to deal with the complexity of fines due to customers, negotiations with regulators and airlines and the management of cash flows. All this means lower margins and missed opportunities in the short term.
Bottom Line
Despite these bleak prospects and the short-term core risk, we are convinced that the Boeing shares will recover from this crisis. Airlines have no choice but to choose one from the Boeing-Airbus (PA 🙂 duopoly. This bearish spelling also offers investors the opportunity to take advantage of the weakness of Boeing & # 39; s shares in the long term and is considering adding this excellent dividend stock, which currently yields 2.19%, to their portfolios.
