Learn to Invest - Investors Grow 对 $BA 的判断变化

In this video we're looking at Boeing, ticker symbol BA. So in this video we're going to go through the basics of Boeing's business. We're going to look quickly at a lot of the crazy news that's happened with Boeing over the past few years that have got them into the position that they're in today, and then we're going to try to project out a bit. Where does the company look like it is today? Where does it look like it's going? And ultimately, is it a good investment today?

So Boeing's business can be broken into three primary segments. There's their commercial business. This is probably the one we're thinking about, the 737 Max, 777. Basically, the planes that airlines buy. Then there's the defense, space, and security. That's more uh their defense contracts with the government. And then there's their services business. The services business is actually fairly reliable and is one of their biggest profit margin sides of their business. But frankly, it's the commercial business that has, let's say, hurt them the most. This is the one where all of the trust factor has really been hurt.

And the reason that that has happened is over the past few years, as you may remember, there's been quite a big There's been quite a few big Boeing events. So the two big plane crashes were in 2018 and 2019 that killed like almost 350 people. And ultimately, it came down that these were Boeing errors that led to these plane crashes, or certainly Boeing-influenced errors. And then in 2024, there was a door plug blowout that happened on the Alaska Airlines uh flight that was happening in Again, this was directly tied to Boeing. It was tr- tied to their quality. It was tied to their training. It was tied to Basically, they gave up on their quality a while back. Now, or let's say they reduced their quality enough to cause a lot of problems.

Now, this is a huge deal because in theory, Boeing's actually in a fantastic industry. Ultimately, they're in a duopoly. There's two primary companies that do what they do. There's Boeing, there's them, and then there's Airbus. Boeing is a US company, while Airbus is a French company, or at least their day-to-day operations are run out of France, and I actually think the company's headquartered out of the Netherlands. Either way, with there's a massive demand for what these companies offer. And there's only really There's only two primary players in the industry. And over the past few years, Boeing has, let's say, given up a lot of ground to Airbus.

Now, it's important to remember that a lot of these problems began in 2018 because we will see in the charts when we go through long-term charts of profit, revenue, free cash flow, things like that. We're going to see how wonky things get since 2018, and then it's our job to determine where we think it's going to go in the future, and I'll map out why I think it's going to go where I think it's going.

So, for Boeing, the issue wasn't build more airplanes, you know, how do they generate generate more revenue? They had to rework the entire business. Everything from, you know, their manufacturing to quality control to training to compliance to the whole thing had to be redone because ultimately, the government, everybody looking at this kept pointing the finger at them. They This was their problem. All of these issues that happened was on them, and it was on their dime. Ultimately, the CEO left, a new CEO came in, and that's where we're going to kind of pick up the story from a numbers perspective.

So, the new CEO, Kelly Ortberg, came in in 2024, and they had a new He had a new priority. So, their priorities became obvious. They had to get the certifications for few other planes, and then they were going to try to reduce debt. Ultimately, they were trying to let no new big problems pop up. So, they almost immediately started decreasing volume and started partially, by the way, they were decreasing volume because the FAA said, "Hey, you can't keep making those planes because, you know, there keeps being giant issues." So, I'm I don't want to make it sound like it was all on them that they slowed things down. But, ultimately, they did slow things down and try to put some repairs in place and try to start improving the system from the ground up.

From a financial perspective, they decided that they were going to reduce debt. Now, I know we're kind of jumping ahead from a numbers perspective, but for now, let's jump over and look at a chart of debt. This is a quarterly a quarterly chart of debt, and we can see since 2024, debt has been reduced a bit. So, okay, first sign looks decent.

Now, one other number that I think is very important for us to look at is backlog. So, this is the amount of orders that they have that they have to deliver in the future. And to me, this is, let's say, some evidence that they have slowed down their manufacturing enough that their backlog is building up. So, when we look at this chart of backlog, we can see that in the most recent quarter, backlog has reached an all-time high, higher than what it was in 2018. So, what we can take from this is that the company does not need to create demand. The demand is already there. This is like 6,200 planes in the backlog. So, they have plenty of demand. It is now all up to their ability to execute their plan to roll out safe, high-quality planes that can easily compete with a company like Airbus. So, the question is quality.

So, the strongest outside signal came from the FAA. So, for eight months, the FAA and a unit that's inside of Boeing, which essentially does their own certification, so it basically Uh you might have heard in the past that Boeing certifies themselves. And that's kind of true, but it's a little bit misleading. So, there are rules that the F F A F A A puts together, and then Boeing's own inspectors have to follow those rules. Now, that the right for Boeing's inspectors to inspect it was stripped away when all of this stuff happened. So, over the past 8 or so months, Boeing's been working to get their 787 authorized to build them out again. Now, essentially, what they had to do is Boeing's inspectors would inspect the plane, and then the F A A would send in their inspectors. They would inspect it. Then they would compare notes. The F A A wanted to know if Boeing came up with the same problems that they came up with. They went back and forth for about 8 months. So, they would do a week on and a week off, and it would like go back and forth from Boeing's inspectors to F A A's inspectors, and then they passed that let's say that initial test. So, that's a good thing. Or at least let's say it's a vote of confidence in Boeing's ability to perform the specific functions that the F F that the F F A F A A is overseeing. So, they need that. You're you're every airline's going to need that. They need the trust of the F A A, and that is something that has to be earned, especially in the case of Boeing since, you know, they lost it.

So, is Boeing actually executing? Well, the answer is yes, but this is they're still in the recovery phase. This is not a victory lap. Boeing delivered 171 commercial airplanes in the second quarter of 2026, and that's the highest level since 2018. The company's ramping up production on the 737. Uh they're aiming towards 47 airplanes per month, while the 787 production has stabilized up to about eight per month. Now, those are signs that the factories are becoming more stable and predictable, although higher production by itself does not prove that the quality problems are completely fixed. So, and that's I think one of the biggest catches here is them pushing out bigger numbers. That that has to it only works if it goes in conjunction with higher quality checks. And ultimately, every production increase creates another test that they have to pass. This is going to take time. Realistically, I think 6 to 8 more quarters of having to watch them closely and see how things are shaking out. Are they actually improving the quality? That's the key to this whole thing. If they can improve the quality, then great. The company, over the long run, could be doing better as long as they stay with that higher quality. And it seems it does seem that the new company, the new the way the company is right now, cares much more about quality for probably very obvious reasons.

And the financial results show exactly why this company's still in the turnaround phase and not it already turned around. So, if we look at let's jump into some of the numbers. Okay, first let's jump in and look at revenue. So, this is a chart of revenue going back the past decade. And again, 2018 I think is the key year we want to pay attention to because that was the last time before all of their issues where we had any, you know, reliable consistency with the company. The goal is for the company to get back from a quality standpoint back to before that phase. I mean, at that point, let's call a spade a spade, they weren't exactly doing great knowing what we know now. But, I do think that it's interesting to see that revenue is ramping back up towards that area, but they have not passed it yet. 2018 is still the peak of revenue generated.

Okay, now let's jump over and look at operating profit margins. So, this is how how many what percentage of revenue becomes operating profit. Really that simple. We can see over the past few years since 2018 it's been negative. It's been all over the place, but it's largely been negative. This is a bad thing, obviously, but we know why that's happening. Now, to me, when I look at this chart, the most interesting part of this chart knowing what we know, we know the full story, we know their shotty quality caused a whole bunch of accidents, right? A whole bunch of deaths. The fact that somebody was in charge and all of that is a little bit silly to me, but that's neither here nor there. From an investing standpoint, looking at this particular chart I look at the first 3 years of this chart and every part of me is real curious. Why is that rising? In fact, let's switch this over on the investorsgo website. By the way, this entire analysis is done on on the investorsgo website, if you're curious. But, let's switch this over to a 20-year chart. Well, now we can see operating profit margins for a while were around what? 6 7 8% pro- operating profit margins. That was consistently where they where they were at. And then what happened? Well, suddenly profit margins started to ramp up leading up to ultimately all of the problems that the company ran into. To me, this is a really interesting point here because what happens when a company who, let's say, gets a bit too full of themselves starts chasing higher profits. Well, you can cut corners. You cut corners, you do a bit shoddier work to ramp up profit margins when you're only after, you know, the final number, increasing profit. You ran to ramp up operating profit margins and just like that the quality falls off and in this case causes a whole bunch of deaths some plane starts going down and all of the future bars after that ends up being their fault. I truly believe that the direct result of chasing profit and chasing speed and chasing higher production led to this issue.

So with that being said looking out into the future if we were going to model this out well we have an idea where it should be. For a while Boeing was one of the they produced high quality jets. They they were one of the it was Boeing and Airbus of course but they were a premium name until they weren't anymore. That being said 6 7 8% operating profit margins I think is a very reasonable level for us to watch for them to get back to. Now they've been they're negative now but they are heading they do appear like they're heading in that direction. They are heading back towards it. But in the future if this is a stock that we buy or a stock that we want to watch I'm going to pay close attention. If operating profit margins climb up above 10% I'm going to have some serious questions. I'm going to need a serious explanation as to how that's happening.

Okay now let's jump over and look at net income. And this is where the story gets interesting. So we jump in and look at net income. Once again we can see over the past decade since 2018 things have gone a little bit crazy but notice in the most recent year 2025 ending the trailing 12 months the numbers actually positive. Now you might ask a good question which is wait you had negative operating income but somehow you got positive net income. And that is one of the funny parts about accounting. This is why research is so important. So when we do the research it turns out that in Q4 of 2025 they sold a piece of the business called digital aviation solutions for about 10 and a half billion dollars. They marked a gain of about 9 and 1/2 billion. 9 and 1/2 billion hits the income statement and it pops and makes net income look profitable, even though it's really not. Since, you know, they can't sell that business again. So, ultimately, it's far better for us just to consider this removed and net income ends up looking very similar to what we saw with operating income. Things might be improving over the near term, but they're nowhere they're nowhere close to out of the woods yet.

Now, one of the charts that's interesting before we jump over and look at free cash flow is shares outstanding. So, when we jump over here and look at shares outstanding, again, this is over the past decade and you can see we have this uh the line there is the 3-year average and we can see the 3-year average leading up to 2018-2019, shares outstanding were dropping, which is what you would expect for a large company like this ER a large mature company to buy back shares. Well, that they were gradually buying back shares and since then, as let's say, you know, the whatever hit the fan, well, that number started to go up. So, not only are they not profitable and showing questionable numbers from a uh from a growth standpoint, well, shares outstanding are also going up. So, this is a negative sign.

Then, when we jump over and look at free cash flow, well, we can see that free cash flow has been a bit more volatile, although just recently, in the past 12 months, they have gone positive. Now, I will point out that big one-off item that helps net income does not affect free cash flow in the same way because technically that one-off item where they sold a business goes to cash flow from investing, not cash flow from operations. So, the fact that 2025, although it was still negative, was a big improvement, that's, you know, that's a good sign and that's excluding that, just so we're on the same page.

Now, let's add analyst estimates for that. For that, we're going to switch over to our discounted free cash flow section and I'm actually going to extend this analysis going out 10 years because I think that if we wanted to invest in this company today, well, we're going to want to we're going to need to be long-term investors. We got to be thinking the next decade, not the next couple of quarters. And going out the next decade, oh, by the way, green bars here, analyst estimates. Blue bars are light blue bars are the computer estimates. We started with a growth rate of about 15% and it gradually tapers off each year going back toward going down to our long-term perpetual growth rate, of which I use 2 and 1/2%. And for that, the stock looks like it could be a bit undervalued right now.

This brings us to a different issue. Or let's try to answer the question, is this worth investing in today? I mean, it could be. The stock does look like it could be undervalued. I'll tell you my concern with it. I'm actually curious to watch this company. I really got interested in this company back in 2020 and this company was on my watch list and not in my bullpen of stocks that I could buy, but on a watch list that I was like keeping an eye on. And at one point I saw the stock drop below 100 bucks a share. And to me, that looked interesting. I was like, okay, this this is I mean, again, they're going to have a lot of There's a lot of people rooting for this company to do well. So, 100 bucks is a share seemed cheap. If it fell back down there, yes, all day I'd want to jump in and buy this. And I would probably jump in and buy it at that point. But at the current price, I'm just not sure there's enough margin of safety because let's jump over and switch to a chart of Boeing stock over the past year. Over the past year, we can see here the stock hasn't done much. So, we got two numbers at the top here uh for on the Investors Grow website. We have the performance over that particular period of time, and then the next number is the annualized return. Right now, they're practically the same because they are we're looking at 1 year. But, what about 3 years? Again, the stock has done practically nothing. What about 5 years? Again, the stock has done practically nothing. And you can see the annualized return is very, very low, and that's my biggest concern for this for this company. My concern right now is that any hiccups in their progress is likely to pull back this stock.

And my fear is you end up with this, you end up with the stock for the next couple of years that doesn't do much of anything. And I'm just not sure it's worth the risk. I think that there are so many good companies out there right now that have pulled back and could be reasonably undervalued that don't necessarily have to turn around their entire business. There might be other opportunities.

Now, if I already own this stock, I might just sit there and hold it to, you know, play it out and see where it ends up. And if the stock had a meaningful pullback from here, like I said, if it ever got back to like 100 bucks a share, even 110, 120, when we look at this chart, if it got to the low end here, okay, yeah, that then that would be interesting.

But, up at this level, I'm just not sure there's enough margin of safety.

Now, that being said, I do like the progress that they're making from a fundamental standpoint, and I am going to add this company to my bullpen. So, if the stock does pull back, okay, now I'm interested. Now, I might jump in and buy it, assuming nothing meaningful changes.

But, if they keep making progress and the stock does pull back because, you know, maybe they have a bad quarter or something, okay, now it's interesting. Besides that, I got to pass on this one. I'm I'm I think that there's better opportunities out there.