Boeing's Comeback Is Building Momentum—Is It Real?

Key Points

• U.S. aviation authorities certified Boeing's 737 MAX 7 this week, ending a years-long review and paving the way for the MAX 10's approval.
• Boeing shares have risen nearly 20% in two weeks, and analysts at BNP Paribas and Sanford Bernstein have expressed positive views following the certification news.
• Despite improving deliveries and cash flow, Boeing still posted a quarterly loss, faces thin profitability, and continues losing order share to rival Airbus.

Few companies have endured a more punishing few years than Boeing Co. NYSE: BA. A series of crises, from grounded aircraft to safety scandals, left one of America's great industrial champions on its knees and its investors nursing years of frustration. But in recent months, something has been shifting, and this week delivered the clearest sign yet that the long road back might finally be leading somewhere.

That sign came on Monday, when U.S. aviation authorities finally certified a key member of Boeing's flagship 737 family, ending a review that stretched back the best part of a decade and removing one of the biggest overhangs that has dogged the company for years. With that hurdle cleared, Boeing can now get on with the business of turning its enormous order backlog into actual revenue.

The market had already been warming to the turnaround potential, and Monday's news added fuel, with the shares now up close to 20% over the past fortnight and near the top of their six-year range. The question investors are asking is whether this is the moment the turnaround becomes undeniable, or merely another false dawn for a company that has produced a few of them.

Why This Week's News Matters So Much

To appreciate the significance, it helps to understand what's been holding Boeing back. For years, the company has sat on an extraordinary backlog of orders, thousands of aircraft that customers want but that Boeing has struggled to build, certify, and deliver at pace. Regulatory delays have been a huge part of that bottleneck.

The certification secured this week directly addresses one of those chokepoints. It clears the 737 MAX 7, a variant stuck in limbo for years, and paves the way for approval of the MAX 10, the final family member still awaiting sign-off. Each step allows Boeing to convert more of that backlog into deliveries, and deliveries ultimately generate the cash the company so badly needs.

Crucially, it also lifts a psychological weight. Every regulatory delay has been a reminder to the market of Boeing's troubled recent history, so clearing this one signals that the company's fraught relationship with regulators may finally be stabilizing, which matters as much for investor confidence as for the numbers.

The Evidence the Recovery Is Taking Hold

It's worth noting that this week's milestone didn't arrive out of nowhere. Rather, it caps a period in which the operational signs at Boeing have been steadily improving, giving the bulls real substance to point to beyond mere hope.

Aircraft deliveries have been climbing at a healthy clip, and the company is maintaining its positive free cash flow outlook, a meaningful marker for a business that has been burning through money for years. Management has also been expanding production capacity to lift the rate at which it can churn out its best-selling jets. Behind it all sits that colossal backlog, worth hundreds of billions and representing many years of future work.

The improving mood has been reflected on Wall Street, with BNP Paribas upgrading its rating on Boeing stock to Outperform after Monday's news. At the same time, Sanford Bernstein reiterated its own positive stance in the aftermath too. With a MarketBeat consensus rating of Moderate Buy, this could be an interesting time to get involved.

Reasons to Temper the Enthusiasm

For all the encouraging signs, however, this is a turnaround that still has plenty to prove, and the more cautious voices make some fair points. The most obvious is that a good deal of optimism may already be reflected in the price after such a strong run, leaving the stock looking far from cheap on some measures.

Operational concerns linger too. Boeing's profitability remains thin and volatile, and it fell short of earnings expectations while posting a loss in last month’s earnings report. The company's own leadership recently said that it will still take a couple more years to put its house in order fully, hardly the language of a business with its troubles behind it.

Then there's the competitive picture. Boeing's great rival Airbus OTCMKTS: EADSY has continued to pull ahead on orders, extending a lead that could take years to close.

A Question of Conviction

That makes it a question of conviction. Those who believe the company has truly turned a corner will see this week's milestone as confirmation the recovery is real, and the current price as a chance to buy in before it fully plays out.

The more skeptical will want a few more quarters of proof before trusting a company that has let them down so often. What's no longer in doubt, however, is that Boeing, after years of bad luck, is starting to move in the right direction again.

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