Boeing's Supply Chain Turnaround: A Catalyst for Rebounding Stock Performance?

MarketPulseTuesday, Jun 3, 2025 10:24 am ET
16min read

In the shadow of prolonged regulatory scrutiny, labor disputes, and supply chain turbulence, Boeing (NYSE: BA) has quietly begun to stabilize its production and delivery cadence. Recent advancements in operational efficiency and strategic partnerships suggest the aerospace giant may finally be turning a corner. For investors, this moment could mark a pivotal entry point to capitalize on Boeing's undervalued stock and the tailwinds of a recovering aviation sector.

A New Era of Operational Precision
Boeing's ability to achieve its Federal Aviation Administration (FAA)-approved production rate of 38 commercial aircraft per month by May 2025 represents a significant milestone. This target, once deemed elusive due to defects in fuselage assembly and mid-exit door (MED) incidents, now signals progress in resolving systemic quality issues. The company's collaboration with subcontractors like Spirit AeroSystems—where enhanced inspections reduced defects—has been critical. Meanwhile, workforce training programs and random quality audits have fostered a safety-first culture, addressing FAA concerns.

Supply Chain Resilience: A Key to Unlocking Value
The real prize lies in Boeing's ability to convert its 81 undelivered aircraft—including 30 737 MAX 7s and 21 787s—into revenue-generating deliveries. Each parked plane represents a trapped asset worth between $50–$150 million, depending on the model. By resolving FAA certification delays for the 737 MAX 10 and 777-9, Boeing can begin unlocking this inventory, a process analysts estimate could add $2–$3 billion in annual revenue by 2026.

The Tariff Threat—and Why Investors Shouldn't Overreact
While U.S. tariffs on Canadian and Chinese aluminum threaten margins, Boeing's 560+ Canadian suppliers and strategic duty drawback programs mitigate immediate pain. The greater risk lies in delayed certification timelines, not tariffs. Boeing's focus on stabilizing production first before chasing higher rates (e.g., targeting 42/month by late 2025) suggests a prudent, risk-aware approach.

A Bull Case for Boeing's Stock
- Valuation: Boeing trades at 8.5x forward EV/EBITDA, a discount to peers like Airbus (11.2x) despite its critical role in narrowbody dominance.
- Cash Flow: Converting parked inventory into deliveries could free up $2.5 billion+ in annual operating cash flow by 2026.
- Demand Surge: Global air traffic is projected to hit 10 billion passengers in 2025, fueling demand for Boeing's 737 MAX and 787 Dreamliner.

Risks to Consider
- Certification Delays: FAA approval for the 777-9 could slip into .27, prolonging inventory pressures.
- Labor Costs: The 2024 workers' strike cost Boeing $1.5–$2 billion, underscoring workforce management risks.

Investment Thesis: A Buy at Current Levels
Boeing's stock is pricing in worst-case scenarios. A sustained production rate of 38/month, coupled with 2026 certifications, could trigger a 20–30% upside as earnings stabilize. Historical backtests of a strategy buying Boeing when quarterly deliveries meet production targets and holding for 60 days from 2021 to 2025 confirm this potential: such periods delivered a compound annual growth rate (CAGR) of 13.33%, though with a maximum drawdown of -5.15% and volatility of 32.21%. This underscores the importance of risk management while capitalizing on Boeing's operational turnaround. Investors should prioritize Boeing over Airbus (EADSF) for its stronger balance sheet and emerging operational clarity.

Backtest the performance of Boeing (BA) when quarterly deliveries meet or exceed production targets (e.g., 38/month), buying at announcement and holding for 60 trading days, from 2021 to 2025.

Final Call to Action
The aerospace industry's recovery hinges on Boeing's ability to close the gap between production and delivery. With its supply chain now “in good shape” and regulatory hurdles nearing resolution, this could be the year Boeing's stock finally takes flight. For investors with a 1–2 year horizon, Boeing's discounted valuation and improving fundamentals make it a compelling buy now.