The Boeing Company BA recently secured a $240 million contract from the U.S. Army Special Operations Aviation Command (“USASOAC”) to remanufacture five MH-47G Block II Chinook helicopters, with deliveries set for 2027. This follows the USASOAC’s 2024 acquisition of four MH-47G Block II aircraft, bringing the total number of MH-47G Block II aircraft under Army contract to 51.
Boeing’s continued success in securing military contracts reinforces its prominence in defense aviation and ensures long-term revenue stability. Therefore, the latest contract win might encourage investors interested in aerospace stocks to add this American jet giant to their portfolio.
However, before adding a stock to one’s portfolio, one must consider other parameters like share price performance, opportunities as well as risks (if any) to investing in the same.
BA Stock Lags Industry & Sector, But Beats S&P500
Shares of Boeing have risen 1.2% over the year-to-date period, outperforming the S&P 500’s loss of 3.3%. The stock, however, lagged the Zacks aerospace-defense industry’s rise of 4.1% and the broader Zacks Aerospace sector’s growth of 4.5% in the said time frame.
Zacks Investment Research
Image Source: Zacks Investment Research
Shares of other aerospace bigwigs like Embraer ERJ and Airbus EADSY have also risen over the year-to-date period. Notably, shares of Embraer and Airbus have gained 29.4% and 14%, respectively.
What’s Favoring BA Stock?
This aerospace manufacturer has recently been in the news, particularly this month, due to the numerous contracts it has secured in the commercial and defense aerospace industries. Notably, Korean Air finalized a landmark order for the delivery of up to 50 widebody airplanes from Boeing. Moreover, Japan Airlines finalized an order for 17 737-8 jets. Also, the U.S. Air Force awarded Boeing a contract to design, build and deliver its next-generation fighter aircraft.
The aforementioned news undoubtedly reinstated investors’ confidence in BA, which has been staggering at the bourses for quite some time now, and this confidence was duly reflected in its share price hike, as mentioned above.
What Lies Ahead for BA Stock?
The steadily rising demand for air travel and the replacement of aging fleets are expected to drive the need for new jets and aftermarket services, serving as key growth drivers for Boeing. Consequently, Boeing experienced notable growth in commercial services volume in the fourth quarter, resulting in a 5.6% year-over-year increase in its global service revenues.
With Boeing’s new airplanes, which are expected to be as much as 25-40% more fuel efficient with commensurate reductions in emissions compared to the previous airplanes, the company should benefit from the trending demand trail in the commercial jet services market. Notably, Boeing forecasts a $4.4-trillion market opportunity for commercial aviation support and services in the 20-year period between 2024 and 2043. This should bode well for Boeing’s jet service business unit over the long run. The unit had a total backlog of $21.40 billion as of Dec. 31, 2024.
In line with this, the consensus estimate for BA’s long-term (three-to-five years) earnings growth rate is pegged at 17.4%, higher than the industry’s 11.2%.
Now, let’s take a sneak peek at the company’s near-term estimates to understand whether the figures mirror similar growth prospects.
BA Stock’s Estimates
Boeing’s estimate for first-quarter 2025 sales suggests an improvement of 16.9% from the year-ago quarter’s reported figure, while that for full-year 2025 sales indicates a rally of 25.7%. A similar improvement trend can be observed from its 2026 sales estimates.
However, its earnings estimates reflect mixed performance. While its first-quarter 2025 earnings estimate suggests a year-over-year decline of 24.8%, the same for 2025 indicates an improvement of 89.1%.
Additionally, a downward revision has been observed in the company’s first-quarter 2025 and full-year 2025 earnings estimates over the past 60 days. This indicates that investors are losing confidence in the stock.
Zacks Investment Research
Image Source: Zacks Investment Research
Zacks Investment Research
Image Source: Zacks Investment Research
Risks to Consider Before Choosing Boeing
While Boeing offers strong growth prospects, it also faces significant challenges that could affect its operational performance, which investors should carefully consider before investing in the stock. Although the commercial aerospace market has been benefiting from steady growth in air travel in recent times, persistent supply-chain issues, particularly those arising from a shortage of aircraft parts, continue to affect the global aviation industry. This, in turn, poses a significant risk for aircraft manufacturers, such as Boeing, Embraer and Airbus. Evidently, supply-chain delays remained a major factor behind receding the U.S. jet maker’s assembly lines in 2024 (as reported by Reuters).
Looking ahead, the number of aircraft deliveries estimated for 2025 dropped to 1,802 (as per International Air Transport Association’s outlook published in December 2024) from 2,293. This indicates 21.4% less capacity added, with persisting supply-chain issues playing the role of a primary growth inhibitor. Fewer jet deliveries imply lower demand for Boeing’s aircraft, thereby weakening its near-term revenue generation prospects.
BA Stock’s Poor ROIC
The stock’s trailing 12-month return on invested capital (ROIC) not only lags the industry’s return but also reflects a negative figure. This suggests that the company's investments are not yielding sufficient returns to cover its expenses.
However, the ROIC of its peers, Embraer and Airbus, is currently better than the industry’s return.
Zacks Investment Research
Image Source: Zacks Investment Research
Should You Invest in BA Stock Now?
To conclude, investors interested in Boeing should wait for a better entry point, considering the stock’s poor ROIC, downward revision in earnings estimates and persistent supply-chain challenges. BA currently has a VGM Score of D, which is also not a very favorable indicator of strong performance.
However, those who already own this Zacks Rank #3 (Hold) stock may continue to do so, considering its recent share price hike and solid sales growth potential. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
