To the relief of investors, the market has bounced back considerably from its troubling performance last year. While the S&P 500 plunged 19.4% in 2022, it has soared more than 18% higher so far in 2023.
But that's not to say that all stocks have recovered. Boeing (BA 0.25%) and NextEra Energy Partners (NEP -0.89%) have both lagged the market's strong performance, and are down considerably from their all-time highs. Let's take a look at why two fool.com contributors find these stocks particularly attractive now.
Boeing is essentially a self-help story
Lee Samaha (Boeing): It's been a tough five years for Boeing. If it wasn't the grounding of the 737 MAX, it was the travel restrictions imposed on the populace by governments. If it wasn't the travel restrictions and the financial pressure put on its airline customers, it was the difficulty of ramping up airplane production due to the ongoing supply chain crisis. If it wasn't multi-billion dollar cost overruns and delays on fixed-price military contracts, it was soaring costs, labor shortages, and component unavailability in its defense business.
Those issues are evident in Boeing's stock price being 52% off its all-time high in 2019. Still, despite all the bad news, Boeing has a lot of potential to improve profitability and cash flow in the coming years. The most significant opportunity comes from the execution on its multi-year commercial airplanes backlog. Its total backlog stands at almost 4,900 airplanes, with more than 3,800 for the 737 MAX. Boeing plans to hit a production rate of 50 a month on the 737 MAX by 2025/2026. Moreover, the environment is improving, with airlines like Delta Air Lines continuing to beat expectations as the industry builds capacity. Meanwhile, a gradual alleviation of the supply chain issues that have dogged the company in recent years should also lead to profit expansion.
Management plans to reach $10 billion in free cash flow generation between 2025 and 2026. That will go a long way to helping it reduce the debt burden (currently $55.4 billion) it built up in the last few years. If Boeing can merely execute on its plans, then the upside to the $126 billion market cap stock is significant.
NextEra Energy Partners provides plenty of passive income
Scott Levine (NextEra Energy Partners): Failing to keep pace with the S&P 500 and its nearly-19% gain, shares of NextEra Energy Partners have sunk about 16%. And that decline is overshadowed by the stock's 33% fall from its all-time high that it touched in November 2021.
Disconcerting as this may seem, it belies the fact that the renewable energy-focused utility is a dividend powerhouse that currently offers a mouthwatering forward yield of 5.5%.
While shares have tumbled in 2023, it's important to note that the company hasn't reported anything troubling that would undermine the stock's underperformance. Instead, investors seem to have unplugged this clean energy utility stock from their portfolios after the company reported first-quarter 2023 earnings that missed analysts' expectations. What investors may have failed to see in the report, though, is that in Q1 2023 the company grew adjusted earnings per share (EPS) 13.5% compared to the same period last year. In addition, management guided for adjusted EPS to increase 25% to 38% from the $2.90 the company reported in 2022 through 2026. Over the same period, management expects operating cash flow to rise at or above the same rate as adjusted EPS, an encouraging sign that the dividend will be adequately supported.
Besides income investors, those looking for a value stock will also find shares of NextEra Energy Partners appealing. Currently, the stock is trading at 6.8 times operating cash flow -- inexpensive in its own right, and a bargain considering the stock's five-year average cash flow multiple is 8.1.
Which stock to buy now?
Both Boeing and NextEra Energy Partners have something to offer. Boeing is an aerospace industry leader that has the potential to soar higher in the coming years, while NextEra Energy Partners is a compelling consideration for more conservative investors looking to fortify their holdings with a stock committed to rewarding shareholders.
