Few companies have spent the past few years apologizing as often as Boeing (NYSE:BA). Lately, though, the headlines have flipped. Less than two weeks ago, the US Navy picked Boeing to build its next carrier-based fighter, the F/A-XX. Commercial deliveries are climbing, and the order book has never been bigger.
Boeing makes money three ways. It sells jetliners like the 737 MAX and 787 Dreamliner to airlines. It builds military aircraft and space systems for governments. And it services the fleets already flying through its Global Services arm. If you’ve boarded a domestic flight in the US, there’s a good chance you sat in one of its planes. Yet, despite holding an essential duopoly position in global aviation, the aerospace giant doesn’t make the cut among the 10 Best Affordable Stocks to Buy According to Wall Street Analysts. The harder question is whether the stock has already priced it in, and the answer depends on a jet business that still isn’t making money.
A $715 Billion Waiting List
Airlines that want large passenger jets have very few places to shop, and Boeing’s order book shows it. The company ended the second quarter with a record total backlog (orders signed but not yet delivered) of $715 billion. Commercial Airplanes accounted for $596.7 billion of that, covering more than 6,200 jets.
Airlines kept ordering through years of production trouble, which says a lot about switching costs. Changing aircraft makers means retraining pilots and mechanics and restocking spare parts. That stickiness also feeds steady work for aerospace parts suppliers that build into Boeing’s programs, even as investors debate underlying profitability amid accounting quirks where Boeing (BA) has negative EBITDA and positive net income—which one is real?
Global Services is the quiet half of the moat. Every delivered jet becomes a decades-long customer for parts, maintenance, and training, and that segment posted an 18.1% operating margin in the second quarter.
Deliveries Up, Fighters Back
The second-quarter numbers showed a factory finding its rhythm. Revenue rose 8% to $24.6 billion, and Boeing delivered 171 commercial airplanes, up from 150 a year earlier. The 737 program began moving to a production rate of 47 jets per month.
Certification, long a sore spot, is moving too. Flight testing is complete on the 737-7 and 737-10, with certification expected in 2026 and first deliveries in 2027. The 777X won FAA approval to begin a new phase of certification flight testing and is also slated for first delivery in 2027.
Defense brought the newest good news. The F/A-XX, which will replace the Navy’s Super Hornets, is Boeing’s second sixth-generation fighter win after the Air Force’s F-47 program. Boeing is building a secure manufacturing facility in St. Louis to support the work, keeping it firmly tied to defense spending, even as market commentators point out that Jim Cramer likes HEICO (HEI) but warns about aerospace and Boeing (BA) due to persistent commercial execution risks.
Can a Money-Losing Jet Business Justify This?
Here’s the catch. Commercial Airplanes, the segment behind most of the backlog, posted a negative 2.7% operating margin in the second quarter. Defense, Space & Security was slightly negative as well, at (0.2)%. Boeing as a whole still lost money. The GAAP loss came to $0.67 per share, and the core loss (a non-GAAP measure) was $0.76. Free cash flow was $631 million, small next to $45.9 billion of consolidated debt. CEO Kelly Ortberg acknowledged that more work lies ahead in the second half.
The trend is improving. A year earlier, those losses were $0.92 and $1.24 per share, and debt came down from $47.2 billion during the quarter. Third-quarter results arrive later this month and should show whether that trend held. The recovery looks especially real, even as Boeing’s (BA) strategic push to balance rising demand with operational bottlenecks continues to test its production ramp.
Paying Up for the Repair Job
Because Boeing is still posting losses, its valuation rests entirely on the earnings investors expect it to make. The stock trades at 49.51 times forward earnings, as of October 9, against 18.80 for its sector. Put plainly, buyers are paying roughly $49.51 for every dollar of expected profit, while the average company in its sector costs about $18.80.
That valuation multiple is usually reserved for the 10 Best Low Priced Technology Stocks to Invest In or fast-growing software names, not an aircraft maker still working its way back to profitability. It assumes the 737 ramp sticks, the new variants clear certification on schedule, and Commercial Airplanes swings to a profit.
To be fair, recovering companies often look expensive on earnings because profits are still near the bottom of the cycle. Even so, a delay on any of those fronts would leave investors holding a stock priced for a recovery that hasn’t fully arrived. Hedge funds have cooled a bit. Ninety funds held the stock in the most recent quarter, down from 99 in the prior one. Short interest is 1.80% of the float, which points to relatively limited bearish positioning.
Priced for a Clean Landing
The evidence points to a turnaround that’s working: more deliveries, narrower losses, a record backlog, and two major fighter wins. But with a forward multiple far above its sector’s, the stock already reflects much of that progress. The setup suits patient, long-horizon investors who are comfortable with execution risk and believe Commercial Airplanes can return to profitability. A slip in 737-7 or 737-10 certification past this year, or a stalled production ramp, would make that multiple much harder to defend.
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