Should You Buy Boeing Stock After CEO Resignation Announcement?
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Key Points
- Boeing stock is up slightly after announcing that CEO Dave Calhoun will step down at the end of the year.
- The airline and defense contractor faces significant regulatory hurdles that are likely to weigh on its profits and free cash flow.
- BA stock is still investable because it is part of a duopoly with Airbus, but investors may want to wait for more information when the company reports earnings in April.
- 5 stocks we like better than Boeing
The Boeing Company NYSE: BA stock is up just over 1% in early trading on March 25. Investors appear to support the company’s pre-market announcement that chief executive officer (CEO) Dave Calhoun will resign at the year’s end.
In a related announcement, Boeing’s chairman of the board, Larry Kellner, announced he would forgo nomination for an additional term. Steve Mollenkopf, the former CEO of Qualcomm Inc.NASDAQ: QCOM, will immediately take over as board chair and will lead the search for a new CEO.
Boeing has had a turbulent 2024, and we’re barely a quarter of the way through. The company’s airliners have been involved in several high-profile safety incidents that call into question the company’s quality control standards. At the extreme, there are calls that the company should be shut down.
That may make you think twice before flying on one of the company’s jets. But when it comes to a company’s stock, sometimes things get so bad that they finally look good. That may be what’s happening to BA stock on this announcement. However, investors may still want to proceed with caution.
Boeing Will Face Significant Regulatory Hurdles
No matter where you stand on government regulations, Boeing will be heavily regulated going forward. That is likely to mean delays in aircraft certification and deliveries. It also means that Boeing will have to cut its forecast for the number of aircraft it can deliver.
With Upgrades Like These, Who Needs Downgrades?
In late March, Deutsche Bank NYSE: DB reiterated its Buy rating on BA stock. However, the firm lowered its price target from the $270 it set in November 2023 to $240. Nevertheless, that would be a 30% increase from the current price.
The bigger concern for investors is that the rating came with numerous caveats. As noted above, it won’t be business as usual for the airliner going forward. That will take a bite out of revenue, earnings, and free cash flow (FCF).
Investors will hope to hear more when Boeing reports its first quarter earnings in late April. However, due to the uncertainty surrounding the FAA probe, the company refrained from offering forward guidance when it reported in January.
Members of Congress Are Selling Their Shares
Another reason why investors should be concerned is that members of Congress have been dumping shares of BA stock in the first three months of 2024. Usually, investors are wise to remember that they have many reasons for selling a stock. However, the timing of these sales raises eyebrows.
On January 9, Representative Blake Moore (R-Utah) sold up to $15,000 in BA shares. That was just days after the Alaska Air flight that launched the FAA probe. Moore serves on the House Budget Ways & Means Committee.
And on February 28, Representative Bill Keating (D-Mass.) also sold up to $15,000 in Boeing shares. Keating is a member of the Armed Services and Foreign Affairs Committees. Significantly, Boeing is one of the largest defense stocks and generated approximately $24.9 billion in revenue from its defense business, which was 32% of the company’s total revenue in 2023.
Getting Involved with BA Stock
Boeing is one part of a duopoly in airline manufacturing with Airbus SE OTCMKTS: EADSF, which accounts for 99% of all aircraft production. A change in the C-suite and on the board makes it less likely that draconian measures will be taken with Boeing; therefore, it’s an investable proposition.
Analysts are generally bullish but haven’t had a chance to digest this latest news. Before this announcement, BA stock was approaching a level of support at around $178. If the company can confirm this level, there may be some upside. However, until the company reports earnings, the stock will likely be range-bound. Boeing suspended its dividend in 2020 and has yet to reinstate it.
Before you consider Boeing, you’ll want to hear this.
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