Skip to Content
Stock Analyst Update

Boeing Progresses Toward 737 MAX Return to Service

We are slightly reducing our fair value estimate for the wide-moat company as management indicated they do not expect to return to free cash flow positivity until 2022.


Wide-moat-rated Boeing (BA) reported a difficult quarter as the continued grounding of the 737 MAX and the pandemic’s severe reduction of travel dramatically reduced aircraft deliveries. We are slightly reducing our fair value estimate to $260 per share from $264 as management indicated they do not expect to return to free cash flow positivity until 2022 due to a buildup of 787 inventory.

The consolidated firm reported a sales decline of 29% and a -2.8% operating margin, as the company faces substantial overcapacity from the grounding of the MAX and the pandemic, leading to a net loss of $466 million, or $0.79 per share. We continue to believe the stock is undervalued as we anticipate that secular forces driving air travel will return in a post-COVID-19 world, which would allow the company to continue ramping 737 production past its previous peak of 52 per month, though we think the company has a lot of work to do in its turnaround. We expect that the company’s $27.1 billion of cash and short-term investments will allow Boeing to survive until the macro environment improves.

In narrowbodies, Boeing remains focused on returning the 737 MAX to passenger service, and the company delivered three 737s. There were clear signs of progress toward a return to service during the quarter: the FAA sent out a notice of proposed rulemaking detailing the required changes to the aircraft and is currently in the comment period on the proposed pilot training for the updated aircraft. We continue to anticipate that the company will receive an airworthiness directive this quarter, which would allow the company to resume deliveries, though many customers are requesting to defer delivery due to the pandemic’s effects on their businesses. We expect robust demand for narrowbody aircraft after the pandemic subsides due to the strong relationship between GDP per capita and flights per capita driving increasing flights in populous emerging markets such as India and Nigeria.

Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.

Burkett Huey does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.