Boeing (BA 1.10%) shares were down by more than 5% as of midday Friday. The move is impossible to look at in isolation, as the S&P 500 was down by 2% simultaneously. The reason for the latter is softer-than-expected jobs data that raised fears of a significant slowdown in the U.S. economy.
A slowdown is bad news for the economy and the airlines that drive demand for Boeing's planes. Spending on consumer discretionary travel and corporate business trips drops during economic weakness.
NYSE: BA
Key Data Points
Boeing's recent results
This shouldn't overshadow the recently reported set of second-quarter earnings. The results were received quite well in some corners of Wall Street, with UBS noting the progress made on 737 MAX deliveries, as discussed previously.
Improving its production and delivery rate on the narrow-body 737 MAX is probably the most important thing Boeing needs to do. Management noted the reactivation of a third production line to enable it to ramp up to a rate of 38 planes a month by the end of the year, compared with just 70 in the whole second quarter.
Boeing's headwinds
That said, not everyone took a rosy view of the earnings, and new CEO Kelly Ortberg will have to navigate plenty of headwinds: ongoing cash outflows, growing debt, potentially tricky labor talks, a defense business that keeps taking charges on problematic fixed-price programs, the possible need to invest in Spirit AeroSystems (a fuselage supplier Boeing is buying), and improving manufacturing quality while ramping up production.
Image source: Getty Images.
The upside potential is substantial, and Ortberg is well respected. However, before investors feel fully confident buying in, Boeing will need to report a few quarters of further progress on 737 production and return the defense business to profitability.
