Airline and defense contractor Boeing(NYSE: BA) has been an iconic representation of American innovation for over a century. When I used to live in Washington D.C., I'd often drive past the Boeing headquarters in Crystal City on may way to work. It was hard not to be inspired by such an incredible business.
But over the last few years, Boeing has been at the center of one negative story after another. The company's reputation is tainted, and with so much hoopla surrounding the bad press, it's beginning to look like Boeing's best days are in the rearview mirror.
Let's take a look at some of Boeing's headaches and assess why I think investors are best off avoiding the aerospace stock right now.
1. Concerns from whistleblowers
Boeing has been the target of a number of whistleblowers over the last few years. Many of these whistleblowers were Boeing employees who publicly stated concerns about the company's commitment to safety and quality assurance.
It's no coincidence that the whistleblowers emerged as Boeing was also the subject of government investigations related to some high-profile crashes.
Naturally, events like this can damage a company's reputation. But for Boeing, the company is in a unique position. Boeing's most direct competitor in the airline industry is Airbus. Given the two juggernauts essentially represent a duopoly, it's going to take much more than some bad press to convince investors that Boeing's prospects are looking bleak.
Image source: Getty Images.
2. A CEO replacement likely isn't the cure-all
The majority of Boeing's revenue can be found among three categories: commercial airplanes; defense, space and security; and global services. The commercial-airplane business was once considered Boeing's bread and butter. However, the company's results through the first six months of 2024 haven't exactly been inspiring.
For the six months ended June 30, Boeing delivered 175 commercial airplanes -- a decrease of 34% year over year. Naturally, Boeing's commercial-airline revenue of $10.6 billion also shrunk by 31% compared to the first half of 2023. Although declining revenue is never a good sign, Boeing investors have been hit with an unpleasant double whammy as the company's cash burn continues to mount. Through the first half of 2024, Boeing has burned over $8 billion. Considering the company's backlog is not growing and Boeing is increasing investments in safety protocols, it's hard to see a narrative in which the company returns to accelerating sales growth and consistent profits anytime soon.
About a month ago, Boeing's board of directors named Robert K. "Kelly" Ortberg as the company's new CEO. It's important to note that Boeing's former CEO Dave Calhoun announced his resignation plans back in March, so it wasn't too surprising to see Ortberg take the helm.
Although this leadership transition might look encouraging, I think it's going to be a while before real change is integrated at Boeing. Until then, there aren't many reasons to think the company's core airline business will turn around.
3. Ground control to Major Musk?
Back in June, two astronauts boarded a Boeing Starliner capsule for a space exploration mission. This was a big step for Boeing as the launch represented the first time Starliner sent astronauts to the International Space Station (ISS).
The problem? The crew was supposed to be back on planet Earth by now but has been stuck in outer space. NASA and Boeing discovered some mechanical issues, including helium leaks with the Starliner, which have delayed the trip back from space. After months of deliberation, NASA has made the decision to bring back the astronauts on a SpaceX Dragon spacecraft.
SpaceX is perhaps Boeing's biggest competitor in the space exploration field and is the brainchild of entrepreneur Elon Musk. If this isn't Musk's checkmate move over Boeing, I don't know what is.
The bottom line
Boeing has some real issues across both its commercial-airline business and its government-defense operation. On top of that, Boeing continues to be at the center of safety accusations, poor manufacturing protocols, and a questionable path forward undermined by billions of cash burn.
If you're an investor seeking exposure to the airline industry, government contractors, or defense businesses, there are many other opportunities out there. While Boeing might be top-of-mind due to its brand recognition, I see too much risk investing in Boeing and think the stock is best left avoided for now.
Should you invest $1,000 in Boeing right now?
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Adam Spatacco has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
