The past three years have been miserable ones for shareholders of Boeing (BA +0.43%). The stock's big 2017 rally in front of the debut of the 737 MAX came to a screeching halt in 2018. And any hopes of a renewal of that uptrend were ultimately upended by early 2019 following two separate crashes of the ballyhooed aircraft. Before Boeing was able to address the design flaw -- a computer problem rather than a structural one -- the COVID-19 pandemic took hold, crimping demand for air travel, and subsequently crimping demand for passenger jets. In several months during 2020, Boeing sold no new planes and delivered only a relative handful.
The stock price is still down around 50% from its 2019 high (and still struggling) even though it's up more than 150% from its early 2020 low.
If it just feels to you as if Boeing's shrugging off its problems, though, you're not crazy. Things are looking brighter. One chart puts everything in perspective.
Image source: Getty Images.
The jet business is taking off again
Boeing's business isn't a complicated one. It sells aircraft. The more it sells, the more money it makes.
It's not a business like grocery stores or electric utilities though, which consumers pay for over and over. Passenger jets are multimillion-dollar purchases that have to remain in service at least a couple of decades to justify their steep expense. Each one can also take weeks and lots of upfront capital to build, forcing aircraft manufacturers such as Boeing to plan their output very carefully. Even the smallest of disruptions, much less ones like a supply chain crisis or a pandemic, can wreak havoc on an aircraft company's operation. And both have rattled Boeing within the past two years.
There's a light at the end of the tunnel though, so to speak.
The graphic below depicts two separate but related data sets.
One of these data sets is (always-volatile) orders, or the number of passenger jets ordered in any given month to be delivered at a specified point in the future. (Note that many aircraft orders can be canceled, so that aspect of the data isn't necessarily etched in stone.) The other data set -- deliveries -- are just that: the number of aircraft delivered in a particular month.
The key details of this particular graphic, however, are the one-year averages of each data set, which better illustrates the bigger-picture trends for both. Take a look.
Data source: The Boeing Co. Chart by author.
You're not seeing things. Orders have averaged right at 75 planes per month for the past year. That's not quite as strong as the 100 orders per month Boeing was seeing in 2018, when airlines were going ga-ga over the 737 MAX. But that is on par with the sort of passenger jet purchases being made between the beginning of 2015 and the end of 2017.
As for deliveries, the current pace of 28 per month is still below the more normalized clip of a little more than 60. Consider the circumstances, though. Boeing can't afford to start making a plane without reasonable assurance a buyer will take delivery, and make payment. Moreover, the pandemic itself has created a logistical nightmare for makers of complex machinery like passenger jets. It can take months for the assembly process to begin operating at full speed again.
Regardless, 28 delivered jets per month is a marked improvement from 2020's average in the teens. And its output trend is still pointed upward.
Clear(er) skies ahead for Boeing
Most investors probably know Boeing is recovering, even if they can't quite quantify the rebound. What most investors might not realize is just how well the rebound is going. Airlines really are purchasing new equipment almost at the pace seen prior to the pandemic.
That's not to say Boeing investors won't bump into some turbulence ahead. The omicron variant has once again rattled consumers, as well as the air travel industry. It's entirely possible airlines will once again be forced to cancel or postpone aircraft orders.
It's also just as possible, however, that consumers and companies have grown too tired of COVID-19 to continue letting it stifle, well, everything. In the meantime, airlines themselves are now using fleets of passenger jets that are an average of two years older than they were before the pandemic took hold. Waiting any longer just may not be an option.
