What Will Boeing Do Post-Earnings?

With shares of Boeing (NYSE:BA) trading around $126, is BA an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Boeing is an aerospace company. It focuses primarily on engineering, information technology, research and development, test and evaluation, technology strategy development, environmental remediation management, and intellectual property management. The company operates in five segments: Commercial Airplanes, Boeing Military Aircraft, Network & Space Systems, Global Services & Support, and Boeing Capital Corp.

Boeing reported second-quarter core earnings per share (non-GAAP) of $2.42, reflecting strong performance and favorable tax items. Second-quarter 2014 results included a $272 million after-tax charge (37 cents per share) on the KC-46A Tanker program, reflecting the cost of additional engineering and systems installation work required to complete the Engineering and Manufacturing Development contract. Favorable tax items include the previously announced tax benefit of $116 million for the 2007-2008 tax settlement, as well as an additional tax benefit of $408 million in the second quarter.

T = Technicals on the Stock Chart Are Weak

Boeing stock has struggled to make positive progress in recent times. The stock is currently pulling back and may need time to consolidate before heading higher. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Boeing is trading below its rising key averages which signal neutral to bearish price action in the near-term.

Source: Thinkorswim

Taking a look at the implied volatility (red) and implied volatility skew levels of Boeing options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

Boeing options

18%

0%

0%

What does this mean? This means that investors or traders are buying a very small amount of call and put options contracts, as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

August Options

Steep

Average

September Options

Steep

Average

As of Wednesday, there is an average demand from call buyers or sellers and high demand by put buyers or low demand by put sellers, all neutral to bearish over the next two months. To summarize, investors are buying a very small amount of call and put option contracts and are leaning neutral to bearish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Increasing Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Boeing’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Boeing look like and more importantly, how did the markets like these numbers?

2014 Q2

2014 Q1

2013 Q4

2013 Q3

Earnings Growth (Y-O-Y)

58.87%

-11.11%

28.77%

11.85%

Revenue Growth (Y-O-Y)

1.05%

8.31%

6.65%

10.61%

Earnings Reaction

-2.3%*

2.41%

-5.33%

5.33%

*As of this writing

Boeing has seen increasing earnings and revenue figures over the last four quarters. From these numbers, the markets have been pleased with Boeing’s recent earnings announcements.

P = Weak Relative Performance Versus Peers and Sector

How has Boeing stock done relative to its peers – Lockheed Martin (NYSE:LMT), Spirit Aerosystems (NYSE:SPR), and Northrop Grumman (NYSE:NOC) – and sector?

Boeing

Lockheed Martin

Spirit Aerosystems

Northrop Grumman

Sector

Year-to-Date Return

-4.95%

12.92%

1.97%

10.4%

6.08%

Boeing has been a poor relative performer, year-to-date.

Conclusion

Boeing is an aerospace company and provider of aircrafts and related products and services to corporations and governments worldwide. The stock has struggled to make positive progress and is currently pulling back. Over the last four quarters, earnings and revenue figures have increased, which has left investors pleased. Relative to its peers and sector, Boeing has been a weak year-to-date performer. WAIT AND SEE what Boeing does this quarter.

Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

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