Boeing airplane

Boeing (BA) Stock Earnings Preview: Traders See Rosy Results

By:Thomas Westwater

Boeing Stock Rally Cools as Earning Results Near

Boeing (BA) is set to report its fourth-quarter earnings on the morning of Wednesday, January 25, and investors have rosy expectations. Seven months ago, the aircraft maker was trading near $113 per share, the lowest since March 2020, when uncertainty around the economy and regulatory issues weighed on investor sentiment.

Today, investors have a clearer picture of the economy and certification issues, and Boeing has rallied about 70% since September to trade around $207. The stock fell a little over 3% amid a broader equity selloff in the last full week of trading prior to the announcement. A continuation higher is on the cards if the numbers impress.

Analysts expect to see earnings per share (EPS) and revenue cross the wires at 0.25 on just over $20 billion in revenue. The company’s performance in its fixed-price defense development programs will be a key focus after a surprise loss of $2.8 billion in the third quarter. Supply chain developments and cost management are other areas investors are keen to analyze.

Fundamental Conditions Improve as Orders Increase

The Federal Aviation Administration (FAA) cleared Boeing to resume 787 deliveries in August, ending a 15-month ordeal. And in December, Congress cleared a path for the FAA to certify the 737 Max 7 and max 10. Last week, the jet maker announced strong order results for December, securing 203 net orders to bring its total for the year to 774, almost double from 2021.

Global air travel has largely recovered to pre-pandemic levels, and China’s reopening should aid the recovery further. The number of global seats booked in commercial air travel for 2023 is off to the best start since 2020, before Covid caused a massive lull in flying. This is encouraging for airlines and should incentivize a strong year of aircraft orders for Boeing.

Scheduled seats on Boeing Airlines

Options Market Pricing for Boeing

The options market was pricing in an expected move of 14.26 for the February 17 expiration. A good portion of that is likely from the upcoming earnings announcement. An iron condor is one strategy commonly used to play earnings that give a defined risk. With the stock price around 207, the expected move puts a theoretical range of about 193 to 221.

Setting the iron condor’s short strikes near or slightly outside that range provides some confidence in the trade. A decrease in implied volatility is likely due to the volatility crush once earnings are announced, but that would help the position if the stock price stayed within the short strikes. The chart below illustrates an example of the P/L dynamics on such a trade.

Boeing Co in trading platform

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

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