I have a special connection to one of the largest aircraft manufacturers in the world.
My grandfather was an engineer for Boeing Co. (NYSE: BA) after he retired from the U.S. Air Force…
My wife’s mother also worked for decades at Boeing’s Wichita, Kansas plant…
And when I was a business editor in South Carolina, I witnessed the company open its Charleston plant where it still builds the revolutionary “Dreamliner” aircraft.
So I’ve always had an interest in the company even though Boeing, nor I, are in Wichita anymore.
The company just announced it delivered 60 new aircraft in June — the most since March.
That brings 2023’s grand total to 266 delivered aircraft while logging orders for 288 more.
On the surface, that seems like great news for those eyeing Boeing as a potential addition to their portfolio.
Today, I’m going to share some trends in the aircraft industry. But more important, I’m going to use Adam O’Dell’s Green Zone Power Ratings system to show you whether Boeing is a good investment right now or not.
Aircraft Fleet Sizes on the Rise
Boeing’s huge order numbers in 2023 are thanks in large part to Air India’s order for more than 200 aircraft at last month’s Paris Air Show.
Riyadh Air, a new carrier in Saudi Arabia, also ordered 40 of Boeing’s 787 Dreamliner aircraft in March.
It indicates airliners are expanding their current fleets. The numbers back this trend up:
In 2019, there were around 25,900 aircraft as part of fleets (carriers). By 2041, Boeing estimates that number will hit more than 47,000.
That’s an 81% increase in total aircraft.
As you can see from the chart above, China is expected to expand its aircraft by about 145% while Europe and the U.S. and Canada are predicted to grow by 79% and 42%, respectively.
All of that means more orders for big aircraft manufacturers … like Boeing.
But is it a trend worth following now with your valuable investment dollars?
Boeing Stock Is Bearish
Boeing stock rates a 21 out of 100 on our proprietary Green Zone Power Ratings system. That means we are “Bearish” on the stock and expect it to underperform the broader market over the next 12 months.
BA's Green Zone Power Ratings in July 2023.
On the news of the massive Air India order and its June deliveries, Boeing stock ticked up more than 1% earlier this week.
And from its September 2022 low to today, the stock has risen more than 78%.
While its Momentum is strong at a 96 rating, we don’t buy stocks on momentum alone. We have five other factors to consider.
That’s where Boeing takes a gut punch.
It rates a 21 on Quality with negative returns on assets, equity and investment. The company’s gross margin is 9.9%, compared to the aerospace and defense industry average of 28%.
On the Value factor, BA rates a 22 with negative earnings per share and a long-term price-to-earnings growth ratio of 129.95. For reference, the industry average is just 2.7.
Bottom line: While Boeing’s stock has had an impressive run since its September lows, our Green Zone Power Ratings system gives a better picture of its future prospects.
It tells us the stock is overvalued, low on quality and weak on growth.
Those are strong reasons to suggest Boeing is a stock to steer away from for the time being.
And if you’re looking for even more stocks to avoid, Adam’s Green Zone Power Ratings Blacklist is a must-have resource for this market. Click here for information on how to access it.
Stay Tuned: Summer Blockbuster Stocks
Tomorrow, Chad is going to dig into the Green Zone Power Ratings system to see if any stocks may benefit from one of our favorite pastimes: going to the movies.
Until then…
Safe trading,
Matt Clark, CMSA®
Chief Research Analyst, Money & Market