What Happened?
Shares of aerospace and defense company Boeing (NYSE:BA) jumped 5.8% in the morning session after the company reported that it had restarted production of the 737 MAX jets. The news provides more constructive insight into the company’s operations after 33,000 workers ended a seven-week strike in November. The company added, “Our team has worked methodically to restart factory operations in the Pacific Northwest. We have now resumed 737 production in our Renton factory, with our Everett (Washington) programs on plan to follow in the days ahead.”.
The shares closed the day at $164.19, up 4.5% from previous close.
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What The Market Is Telling Us
Boeing’s shares are not very volatile and have only had 7 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 3 months ago when the stock dropped 8.3% on the news that Wells Fargo analyst Matthew Akers downgraded the stock’s rating from Equal Weight (Hold) to Underweight (Sell) and lowered the price target from $185 to $119. The new price target implied a potential 25% downside from where shares traded when the downgrade was announced.
The analyst called out cash flow concerns relating to BA’s efforts to build new aircraft. The analyst added, “Boeing (BA) had a generational free cash flow opportunity this decade, driven by ramping production on mature aircraft and low investment need…But after extensive delays and added cost, we now see growing production cash flow running into a new aircraft investment cycle, capping FCF a few years out.” Looking ahead, the analyst is forecasting that Boeing might have to issue more stock (potentially dilutive to existing shareholders) to shore up its balance sheet and fund future aircraft investments.
Boeing is down 34.7% since the beginning of the year, and at $164.46 per share, it is trading 37.8% below its 52-week high of $264.27 from December 2023. Investors who bought $1,000 worth of Boeing’s shares 5 years ago would now be looking at an investment worth $472.72.
When a company has more cash than it knows what to do with, buying back its own shares can make a lot of sense–as long as the price is right. Luckily, we’ve found one, a low-priced stock that is gushing free cash flow AND buying back shares.
