BA first quarter earning review!


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By: Ahura Chalki

Usually, the Tourism industry loves cheap Oil. Cheap oil means cheaper Airline tickets, more travel, more orders for new and better airplanes and services… but not when we are talking about a global pandemic and we are all staying home and staying safe.

Due to the virus, this  earning report is expected to be the worst of all time for Boeing (NYSE:BA) Company for Q1 2020. The company is expected to report earnings today before the market open. The report will be for the fiscal Quarter ending Mar 2020. According to Zacks Investment Research, based on 5 analysts’ forecasts, the consensus EPS forecast for the quarter is -$2.04. The reported EPS for the same quarter last year was $3.16.

For a better image of this industry, there are two main indexes that are good to check.  (i) Travel and Tourism and (ii) US durable goods reports.

The unexpected COVID-19 pandemic, which has already infected more than 3 million people all over the globe, crashed the tourism business, like never seen before. According to data provider “Cirium,” travel demand has collapsed some 90% and about 44% of global travel plans are currently  on-hold, waiting for  restrictions and lockdowns to be removed.

New orders for US manufactured durable goods plunged 14.4% month-over-month in March 2020, following a downwardly revised 1.1% gain in February and worse than market forecasts of an 11.9% drop. It is the biggest drop in durable goods orders since August 2014, as the coronavirus pandemic led to business and store closures. Demand for transportation equipment sank 41%, mainly due to a 296% drop in orders for non-defense aircraft and parts. Excluding transportation, new orders decreased by 0.2%, and excluding defense, new orders went down 15.8%. Core capital goods orders, which exclude aircraft and military hardware, rose 0.1%.

After Q4 19, when the company missed expectations following the 737 MAX issues, after which the company reported more cancellations than new business in 2019, Boeing was expecting better business for the current year, but they never had a chance for that, especially in the first quarter.

As investors do not have much hope for the first quarter results, all eyes will turn to the company plan for the post-pandemic situation. Executive David Calhoun told shareholders recently that “The health crisis is unlike anything we have ever experienced, and it will be years before this returns to pre-pandemic levels”

There are two scenarios after the pandemic. On the one hand, since the Oil prices will still be lower than pre-pandemic, cheaper airline tickets may help the industry to grow faster; on the other, social habits will change and fears will take a long time to go away –  as Mr. David Calhoun believes, it could take years. Whatever happens, 2020 will be a very dramatic year for Boeing.

Technical overview – Daily Chart

Higher market volume in a clear downtrend chart is not a good signal for shareholders. While the OBV trend line is clearly above the price and RSI at 40 and all main MA seeing above the candles, technically everything is confirming deeper prices.

After the latest sharp decline of February, in correction, the price could not breathe 38.2% of its Fibonacci, which turned lower than 23.6%. $89 of March low is the key support, while in return, Boeing has a hard job to confirm its uptrend, by reaching 61.8% of its Fibo, sitting at $252. Before that $188.50 key the first main resistance.

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