Is Boeing Stock a Buy Before Jan. 28?

Boeing (NYSE: BA) will release its fourth-quarter 2024 earnings on Jan. 28. Naturally, investors will eagerly await the company's outlook from CEO Kelly Ortberg (appointed in August). There's plenty of potential for improvement at Boeing.

Boeing in 2025

It's not difficult to see what Boeing needs to do operationally in 2025, but it's much harder for the company to actually do.

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The Boeing Commercial Airplanes (BCA) segment must first achieve a consistent monthly output of 38 737 MAX jets before planning any production expansion. This is not only a critical event to restore confidence in its ability to deliver airplanes and keep airlines happy, but it's also important from a profitability and cash flow perspective. Volume ramps have always been the key lever to ramp profit margins at BCA. Furthermore, investors will want to hear that the 777X is still on track for its first delivery in 2026.

In Boeing Defense, Space & Security (BDS), investors want to hear that Boeing has passed key milestones on the way to reducing risk on the fixed-price development programs that have caused multibillion-dollar charges and losses at BDS, as well as some color on when the BDS segment can return to consistent profitability.

Boeing's upcoming earnings

Unfortunately, investors are unlikely to hear everything they want from management on the earnings report and earnings call. Boeing's cultural transformation, as Ortberg consistently highlights, demands a sustained effort and won't happen overnight. Small variations in quarterly earnings are unlikely to make a huge difference.

Still, aside from outlining operational objectives and administrative changes (BDS still doesn't have a permanent CEO after former BDS president and CEO Ted Colbert left in September), there's also the question of restoring investor confidence in Boeing's guidance.

Image source: Getty Images.

Restoring investor confidence

There's an unfortunate tradition of prominent industrial company CEOs leaving office while stubbornly clinging to guidance that the investment community had no faith in. For example, former General Electric (now GE Aerospace) CEOs Jeff Immelt and John Flannery ended their tenures without formally taking down guidance that would never be met.

Boeing's former CEO, Dave Calhoun, arguably did the same thing by not taking down the $10 billion in free cash flow (FCF) in 2025/2026 aim. As late as April 2024, Boeing's CFO Brian West told investors: "We remain confident in our ability to achieve $10 billion of free cash flow. However, given our continued focus on safety, quality, stability, we continue to expect that this goal will take us longer than we originally planned and later in the '25, '26 window."

For reference, the current Wall Street analyst consensus calls for an outflow of $2.8 billion in 2025 (management has already told investors it expects a cash outflow in 2025), and just $5.4 billion in FCF in 2026.

As such, Ortberg has an opportunity to reset investor expectations, starting with 2025 guidance.

BDS adjustments

Furthermore, on BDS, Ortberg has been clear that Boeing can't "walk away" from its problematic fixed-price programs. However, he also said BDS has "to work with the customers and see if there's areas where we can trade things off with them and help us and help them too.

Image source: Getty Images.

Is Boeing stock a buy before it gives results?

There's potential at Boeing. It has a half-trillion-dollar backlog and continues to win orders from airlines at BCA, and the potential turnaround at BDS boils down to internal execution. Moreover, Ortberg has an opportunity to perform a fundamental reset of investor expectations.

As such, there's a lot to look forward to in Boeing's earnings report, but it makes sense to wait and see what he has in store for Boeing in 2025 and whether there's any likely progress in ramping 737 MAX production and derisking BDS fixed-price development programs while working toward returning the segment to profitability.

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Lee Samaha has no position in any of the stocks mentioned. The Motley Fool recommends GE Aerospace. The Motley Fool has a disclosure policy.