Boeing, the renowned aircraft manufacturer, recently disclosed its September delivery figures, which left much to be desired. However, despite these lackluster numbers, investors seem undeterred – and there’s a perfectly logical explanation for their optimism.
During the last month, Boeing successfully delivered a total of 27 commercial jets. Amongst these, 15 were from their flagship 737 MAX series. In the preceding month of August, Boeing managed to deliver 35 jets, 22 of which belonged to the MAX family. In July, the company reached even higher numbers by delivering a total of 43 jets, with the MAX series accounting for 32 of them.
Unfortunately, this brings the third-quarter delivery figures to a total of 105 jets, with 69 being from the MAX series. These numbers fall short of the Wall Street estimate of 118 jets, including roughly 77 MAX aircraft. As a result, it’s understandable that some initial disappointment was observed.
Surprisingly, despite this setback, Boeing’s shares soared by 3.1% during midday trading on Tuesday. In contrast, the S&P 500 and Dow Jones Industrial Average only experienced modest gains of 0.7% and 0.6%, respectively.
What accounts for this seemingly positive market response? The explanation is rather straightforward. Investors had already anticipated a challenging quarter due to declining Wall Street projections. Over the past few weeks, estimates for deliveries dwindled from around 137 jets to 118 jets. It is worth noting that Boeing’s supply chain issues have played a role in this downward adjustment. For instance, supplier Spirit AeroSystems (SPR) has encountered difficulties in delivering essential parts.
In conclusion, while Boeing’s September delivery figures may have fallen short of expectations, investors remain largely unfazed by this outcome. Despite supply chain obstacles and lower projections, market participants continue to exhibit confidence in the company’s long-term prospects.
Falling Delivery Numbers Impact Boeing’s Sales
The recent decline in delivery numbers has not only affected Boeing’s sales estimates but also impacted investor confidence. It is projected that Boeing’s third-quarter sales will amount to approximately $18.5 billion, a decrease from the previously anticipated $20 billion. Similarly, third-quarter sales for 2022 stood at $16 billion, indicating a slight decline. Additionally, Boeing delivered a total of 112 planes during the same period in 2022.
Investor Reaction and Stock Performance
Responding to the reduced sales estimates, investors have taken measures to sell off their Boeing stocks. As a result, stock prices have experienced a decline of around 9% within the past three months. In comparison, the S&P 500, a broader representation of the stock market, has only seen a 1% decrease during the same timeframe.
Future Outlook and Production Increase
Due to the forward-looking nature of the stock market, the impact of the weak delivery numbers has already been factored in by investors. However, it remains crucial for Boeing to enhance its production capabilities in the future. Wall Street expects a substantial increase in deliveries for the year 2023, predicting a total of 548 planes. Up until now, Boeing has successfully delivered 371 planes in the first nine months of 2023, leaving a target of 177 planes to meet the Wall Street consensus in the fourth quarter. It is worth noting that this target, similar to the third-quarter figures, may be overly optimistic and might need to be revised.
Implications for Investors
Although some of the adjustments have likely been reflected in the current stock price, it is essential for investors to consider the long-term prospects. Industry analysts anticipate a gradual recovery for both Boeing and the aviation industry as they bounce back from the lows caused by the Covid-19 pandemic. Wall Street even forecasts future growth, with expectations of 707 jet deliveries in 2024 and a further increase to 779 deliveries in 2025.