Boeing (BA) has had many ups and downs lately, from blowout earnings to President Donald Trump's trade war and 737 Max crashes. But investors wondering if Boeing stock is a good buy now should look at the aerospace giant's fundamentals and the stock chart.
Boeing Stock Fundamental Analysis
Boeing earnings per share growth has averaged 41% over the past three years, while quarterly EPS growth has averaged 26% over the past three quarters, according to IBD's Stock Checkup.
In Q4, Boeing earnings unexpectedly rose to $5.48 a share, blowing out analyst views for a decline.
On the revenue side, growth has averaged just 1% over the past three years, but has demonstrated steady gains over the last six quarters. In Q4, the top line grew 11.7% to $28.34 billion, easily topping estimates for $26.65 billion.
Q1 Boeing earnings are due Wednesday, and the 737 Max grounding will have an impact after deliveries were halted last month. The company said that 737 deliveries tumbled in Q1 and that March saw no orders for the jetliner. Boeing 737 Max production will be cut to 42 a month from 52, the aerospace giant said on April 5.
Wall Street sees the Boeing 737 Max fallout extending further into the year. Goldman Sachs cut its price target on Boeing stock, warning 737 Max deliveries will go to zero in Q2. Baird analysts said they also assume no Boeing 737 Max deliveries in Q2 and see total 2019 deliveries "significantly reduced." Bank of America Merrill Lynch downgraded Boeing stock to neutral, as problems with the 737 Max could last three months longer than expected.
Boeing Stock Technical Analysis
Boeing stock broke out of a cup-with-handle base in late January and then climbed nearly 14% to a new high in March. But shares then sold off as the 737 Max crisis spiraled, completing a so-called round trip from the buy point, which is a sell signal, according to Marketsmith analysis.
A round trip occurs when a stock gives up all the gains achieved during the breakout. Investors should take at least partial profits from a stock once it has risen 20%-25% from a buy point to avoid losing out on gains.
For now, Boeing stock is not showing any buy signals and is still compromised after it broke below its 50-day moving average, a key level of support. Before Boeing stock can form a new base, it will need to climb above its 50-day line.
Boeing stock did find support at its 200-day line in late March, and rallied back to its 50-day last week. But shares have since tumbled on the Boeing 737 Max production cuts and other signs of a long-lasting negative impact. Boeing stock remains above its 200-day line.
The relative strength line, which tracks a stock vs. the S&P 500 index, hit its lowest levels of the year earlier this month, attempted to recover, then fell again. The RS line is the blue line in the chart below.
Boeing stock's CAN SLIM fundamental metrics include an 84 Composite Rating out of a best-possible 99 and an 93 EPS rating.
Boeing Stock Is Not A Buy
Boeing's technical weakness is clear. Fundamental challenges are going forward due to the Boeing 737 Max. Bottom line: Boeing stock is not a buy right now.
In addition, analysts have slashed their Q1 earnings and revenue forecasts heading into Boeing's report Wednesday.
Boeing is also expected to cut significantly its 2019 guidance from January, before the 737 Max fleet was grounded.
Even when the planes are flying again, they face lingering skepticism. An IBD/TIPP Poll earlier this month found that 51% of Americans who are following the Boeing crisis said they would avoid flying on a 737 Max once it has re-entered service, with 28% saying they were "very likely" to avoid it and 23% saying they were "somewhat likely."
And among investors tracking the news, 44% have a lower opinion of Boeing as a company, 1% have a more favorable view, and 54% said their view hasn't changed.
The aerospace giant is facing headwinds following the fatal crash of an Ethiopian Airlines 737 Max jet in March.
Officials suspect problems with the Maneuvering Characteristics Augmentation System are to blame for the Ethiopian Air crash as well as an October Lion Air crash. Combined, the two crashes killed 346 people.
The Boeing 737 Max planes have been grounded, and U.S. lawmakers are questioning the Federal Aviation Administration's oversight of certifying the new plane.
Boeing's defense business is also facing negative news. The KC-46 tanker for the U.S. Air Force is more than two years behind schedule and has cost Boeing $3.5 billion in charges for cost overruns. Deliveries had to be stopped repeatedly this year after debris was found in delivered tankers.
But Boeing has seen some good news in the fighter jet market. The Air Force's 2020 budget request includes eight updated Boeing F-15X fighters. Future budgets could include 18 jets per year up until 2024, for $7.8 billion.
Boeing also produces the F/A-18 Super Hornet for the U.S. Navy and foreign militaries. And last year, it won an Air Force contract to produce the T-X trainer, which has extensive sales potential in the U.S. and abroad.
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