Here's a Boeing Stock Trade Idea Amid -$3.5 Billion Cash Flow Expectation
After the aerospace giant preannounced its quarterly results, the stock sold off overnight and the chart now offers a trade idea.
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The gang that couldn't shoot straight, the firm that just can't get out of its own way, did it again.
Now, I'm a little jaded, a little biased when it comes to Boeing BA. I've told you that story, but because of something a staff sergeant in the Air Force told me on our way down to Panama four decades ago, I have never done more than trade Boeing short-term. I've never invested in the name.
Late Thursday, Boeing preannounced some of its fourth quarter financial results and the stock sold off overnight in response. The firm expects to report Q4 revenue of $15.2 billion, operating cash flow of $-3.5 billion and a GAAP EPS of $-5.46. That's a net loss of about $4 billion. Wall Street had been looking for an EPS of $-1.66 on revenue of more than $16 billion. That's a net loss of about $4 billion. Boeing is scheduled to report its actual results this coming Tuesday, January 28.
Commercial aircraft results will reflect the negative impact of the long IAM work stoppage and subsequent agreement that resulted in greatly reduced deliveries and pre-tax earnings charges of $1.1 billion on the 777X and 767 airliners. The work stoppage had halted 737 Max jetliner production completely. The 777X program alone will account for a pre-tax charge of about $900 million due to increased labor costs and will be spread out over the next few years. The initial delivery of a 777-9 jet is still set for the calendar year 2026. For the fourth quarter, commercial aircraft operating margin is now expected to print at -43.9%.
Away from commercial aircraft, the firm's Defense, Space & Security segment is expected to recognize pre-tax charges of $1.7 billion spread across a number of programs. Those two astronauts are still up there, aren't they?
Boeing, Spirit Merger News
Later on, Thursday evening, more news broke. Spirit Aerosystems SPR and Boeing had agreed to amend a memorandum from early 2024 that will allow Spirit to delay repayment of advances made in order to keep Spirit's facilities open during Boeing's labor strike to Boeing until 2026. For all that matters, Boeing had agreed to reacquire Spirit in mid-2024 for $37.25 in an all-stock deal.
Jeppesen Drawing Interest
On Friday morning, Bloomberg News reported that Boeing's Jeppesen navigation business, which the firm does not consider to be core to what it does, is drawing significant interest from both other aerospace firms and private equity investors. According to the report, RTX RTX and Honeywell HON have shown some interest as have non-aerospace publicly-traded investors such as Blackstone BX and Carlyle Group CG.
GE Aerospace GE was not mentioned in the piece as having shown interest but was mentioned as a potential player. The sale of the unit is expected to possibly generate between $6 billion to $8 billion for Boeing at a time that the firm could use a non-debt related infusion of dough.
What Does the Chart Say?
Readers will see that BA has already broken out of a falling-wedge pattern, which is a bullish pattern of reversal, which closed in December. The stock rather easily retook its 21-day EMA, 50-day SMA and 200-day SMA, that last one being most important to portfolio managers exposed to the stock from the long side.
Relative strength has cooled a bit but still sits at a better than neutral level. The daily MACD is mixed. The histogram of the nine-day EMA is now just a smidgen above the zero-bound, while the 12-day EMA and 26-day EMA duel each other for supremacy.
I'm not buying Boeing for an investment. I'll tell you that straight up. For a trade, I'd be OK getting long a small-sized position at or close to the 200-day SMA, which is running along the stock's 23.6% Fibonacci retracement level of the late 2023 through November 2024 sell-off. The idea, if loading up on something at the 23.6% Fib. level, would be to be out of the position close to the 38.2% Fibonacci level on the same scale.
In other words, in close to $167, out close to $186, or vice versa for short sellers. Remember, especially when trading... Even more so than investing with conviction where one might "dollar cost average," there is no adding below or above the level and we never take more than an 8% loss.
At the time of publication, Guilfoyle was long RTX and GE equity.
