What happened
Shares of Boeing (BA +2.58%) closed Wednesday's trading session down by 4.8% as the market took a dim view of the aviation giant's fourth-quarter earnings report.
Given that both General Electric (GE +6.76%) and Raytheon Technologies (RTX +2.24%), two leading aircraft engine makers, have already reported excellent numbers and guidance for their commercial aviation businesses, it's clear that Boeing's problems aren't industry-wide issues -- they're Boeing issues.
Boeing's stock is getting left behind in the aviation recovery. Image source: Getty Images.
During the earnings call, CEO Dave Calhoun described 2021 as a "rebuilding year," and CFO Brian West said he thought of the company's 2022 in "three parts." The first part will involve hitting the key milestones necessary for it to resume 737 MAX deliveries to Chinese customers and to restart deliveries of the 787. The second entails improving Boeing's operating metrics after those milestones are reached, and the third will require it to accelerate its financial performance in the second half of the year.
That's a perfectly feasible plan. The problem is, as West conceded, "we can't predict when deliveries will restart" on the 787, and the resumption of deliveries of the 737 MAX to Chinese customers remains a watch item.
In addition, Boeing's management disappointed investors by announcing that the anticipated "abnormal costs" on the 787 would be around $2 billion -- a figure $1 billion above the company's previous estimate.
So what
The news is disappointing, and it's worth noting that shares of General Electric (a joint-venture partner in the company that makes the engines for the 737 MAX) and Raytheon Technologies (whose Collins Aerospace subsidiary has exposure to the 737 MAX and 787) also fell after Boeing released its earnings report.
That said, the game plan that West outlined for 2022 is still a work in progress, and sentiment should turn around pretty quickly when (and if) Boeing passes the milestones that he discussed. Moreover, given the debacle that resulted from former CEO Dennis Muilenburg being far too optimistic about the timeline of the 737 MAX's return to service, it's understandable if the current management is taking a cautious tone.
Now what
Boeing needs to execute its game plan for 2022 and start to better position itself for the expected recovery of the commercial aviation market. That's likely to start with an improvement in the second half, and hopefully, some positive news flow before then. But, until then, there are better ways to invest in the commercial aviation recovery.
