Is Boeing done for?

As bad as the COVID-19 crisis is for the airline industry, the fate of aerospace giant Boeing (Boeing Stock Quote, Chart, News NYSE:BA) looks much gloomier.

So says investment advisor Ross Healy who thinks this is one stock that won’t be bouncing back anytime soon.

“You really don't know what to say about the company and maybe about management,” said Healy, chairman of Strategic Analysis Corporation, who appeared on BNN Bloomberg Monday. “Unfortunately, they really slopped it with the Max 8 plane. They should have started from the ground up and they didn't. They put together a flying coffin and sure enough it delivered.”

Boeing’s share price has been dropping like a stone in recent weeks, with the pace only picking up as time goes by. Boeing finished 2019 up slightly, perhaps a surprise considering the calamity surrounding the company ever since two of its 737 Max 8 planes crashed and precipitated not just the grounding of the entire fleet but federal investigations into the company’s activities and testing of the plane and a suspension of production of the 737 Max, which took its maiden flight in 2016.

The COVID-19 pandemic has laid waste to the global airline industry, with carriers now slashing service dramatically and laying off employees. Industry experts say that bankruptcies will follow if governments don’t provide support as the crisis continues.

Yesterday, Boeing announced it was in talks with the US federal government over potential aid for both the company and those in its supply chain.

“The long term outlook for the industry is still strong, but until global passenger traffic resumes to normal levels we’re taking steps to manage the pressure on our business,” said Boeing in a press release on Monday. “We’re leveraging all our resources to sustain our operations. Meanwhile, ready short term access to public and private liquidity will be one of the most important ways for airlines, airports, suppliers and manufacturers to bridge to recovery, and we appreciate how the Administration and Congress are engaging with all elements of the aviation industry during this difficult time.”

Boeing’s troubles may come as a surprise to some, as even considering the 737 Max disasters, the company is just one of two (along with Airbus) largest commercial aircraft makers. But Healy says the once-solid company is now looking extremely shaky in its fundamentals.

“The earnings forecasts have just collapsed underneath the company,” said Healy. “And even as much as the company is down, I think 60 per cent to date, the fair market value based on the current earnings forecast is still minus 43 per cent from here, so I don't see the bottom.”

“The balance sheet is weak as well. So these people who've bought back stock to support their own position, they've trashed the balance sheet. And now the earnings are being trashed as well,” Healy said.

Earlier this year, Boeing posted its first annual loss in over two decades, $636 million for 2019. The company’s fourth quarter 2019 showed a revenue drop by 37 per cent year-over-year and an adjusted EPS loss of $2.33 per share. (All figures in US dollars.)