Boeing investors seek safer skies as safety concerns weigh on Boeing stock

Investors who are well-versed in aerospace stocks know that backlogs, commercial aircraft orders, and government contracts are important. But so is safety.

Just one safety incident, particularly when it results in tragedy, can undo years of goodwill built by a company. In the case of Boeing, multiple negative episodes have tarnished the company's image. Once upon a time, Boeing was considered a bellwether, must-own industrial stock. Still, that reputation vanished in October 2018 when Lion Air Flight 610, flying a new Boeing 737 MAX, crashed, killing all 189 people aboard.

Boeing's safety record must be accounted prior to investing in the stock. Six months later, Ethiopian Airlines Flight 302, flying an older version of the 737 MAX, also crashed, resulting in 157 deaths. In January 2024, an Alaska Airlines flight operating a Boeing 737-9 was climbing when an MED plug came loose, causing cabin depressurization. The company has also faced problems with its Starliner program that resulted in astronauts being stuck in space for nine months before a rescue by Elon Musk's SpaceX.

Boeing investors are looking for friendlier skies

Boeing's safety woes and reputational damage have hurt its standing as a long-term investment. Over the 10 years ending April 1, Boeing shares fell 18.7%, while the S&P 500 rose more than 65% over the same period.

The period included Boeing borrowing $50 billion from Uncle Sam and suspending shareholder dividends in 2020. Today, Boeing is one of just three members of the Dow Jones Industrial Average that do not pay dividends. The other two are Amazon and Salesforce, which can be somewhat forgiven for not paying dividends because they are tech companies using proceeds to continue growing their operations.

Boeing may be getting it right

While “things can’t get any worse” is not actionable investing advice, there are signs Boeing is turning a corner on the safety front. One analyst says investors should expect “incremental failures” related to the design and production of the 737 MAX and 787 commercial aircraft. That matters because those jets account for a substantial portion of Boeing's projected long-term revenue.

Boeing's financial picture is not entirely gloomy. There is a belief that the industrial company can generate cash flow and grow earnings before interest, taxes, depreciation, and amortization (EBITDA) while trimming debt.

Boeing must walk a fine line between debt reduction and reinvestment in its business. Still, the good news is that 737 MAX production is meeting the right consistency metrics, and deliveries are gaining momentum.