Exploring Optimal Boeing Investment Strategies for Maximum Profits
In 2025, Boeing (BA 0.30%) grapples with challenges while also holding opportunities to capitalize on its commercial aerospace and defense businesses' backlog. Despite a rough year, the company garnered a significant order from Pegasus Airlines, highlighting the enduring demand for Boeing aircraft. To maximize returns, it's crucial for Boeing to execute more effectively in 2025.
Here are three vital aspects worth monitoring in Boeing's journey to improvement:
Excelling with the 737 MAX
The Turkish-based Pegasus Airlines' commitment to purchasing 100 Boeing 737 MAX planes, with the option for an additional 100, underscores the underlying demand and Boeing's extensive backlog. With 4,818 of Boeing's total 6,268 commercial airplane backlog positioned in the 737 MAX, the aircraft's success potential is promising.
To ramp up production, Boeing must address the challenges it encountered in 2024, including the Alaska Airlines blowout and industrial action that impacted the delivery rate. Boosting the 737 MAX delivery rate to its target of 38 monthly deliveries is essential for the stock's recovery.
However, achieving this goal is not a simple task. Suppliers must align with Boeing's delivery rates, posing difficulties for companies like Spirit AeroSystems, which is set for acquisition in 2025, and CFM International, the GE Aerospace joint venture responsible for 737 MAX engine production.
Overcoming Challenges in Defense Programs
The Defense, Space, and Security (BDS) segment of Boeing faces issues primarily due to higher-than-estimated manufacturing costs and cost pressures derived from fixed-price development programs. These issues, along with the departure of former BDS CEO Ted Colbert, leave Boeing with an opportunity to do better in this sector.
One approach to revitalize the BDS' profitability is to focus on the 60% of the business that is already profitable. With the labor strike now over, BDS should observe an improvement in its profitability. Additionally, Boeing can work on resolving the fixed-price development programs and hopefully witness the segment's return to profitability by 2025.
Ensuring the 777X Remains on Course
While Boeing has secured more than 480 orders for its widebody 777X, including 205 from Emirates, delivery delays persist, culminating in frustration for airlines and resulting in multibillion-dollar charges for Boeing. However, the future for the 777X looks promising, considering the positive demand outlook for widebody aircraft over the next few years.
For Boeing to capitalize on this potential and meet Emirates' expectations, the company needs to stay focused on delivering the 777X on time. Despite the challenges, Boeing must maintain its momentum and justify the faith its clients have in its products.
- To maximize profits from its commercial aerospace business, Boeing should prioritize increasing the delivery rate of its 737 MAX planes, which have a promising success potential with 4,818 orders in its backlog.
- In order to address supply chain challenges and reach its target of 38 monthly deliveries, Boeing needs to collaborate effectively with its suppliers, such as Spirit AeroSystems and CFM International, which will be acquired and responsible for engine production in 2025.
- To improve the profitability of its Defense, Space, and Security segment, Boeing should focus on optimizing the 60% of its business that is already generating profits, and resolve issues with fixed-price development programs to return to profitability by 2025.
- Despite delivery delays and multibillion-dollar charges, Boeing must remain focused on delivering the widebody 777X on time to meet Emirates' expectations and maintain its credibility, considering the positive demand outlook for widebody aircraft in the coming years.
