Earnings

The quarter itself was impressive: a narrower than expected loss alongside beats on revenue and free cash flow (the money metric).

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Revenue: $22.02 billion v $21.2 billion expected.

EPS: -0.47 cents v -0.78 cents expected.

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BA did not provide 2024 guidance, messaging a square focus on safety and quality.

Gorilla Take

The quarter went as I expected: upside surprises across the board. Limited options for commercial airlines and robust travel demand pretty much ensured that outcome. However, I did anticipate earnings would be a binary event. I am surprised, pleasantly, that the market appears to be embracing their guidance suspension – up ~1.75% as of 9:00 AM – as BA focuses squarely on safety and quality. 

Although the results are out, the earnings call is not until 10:30 AM ET. Additional details there could reverse or accelerate BA’s price action at the open. 

Next Step

I’m looking to exit my BA position by the end of the week. The thesis was that earnings would send the stock on a path to refill the gap to $260. Unfortunately, short of amazing commentary on the call, I don’t think these results – specifically the suspension of guidance – will allow BA to close that gap on its own. BA is “dead money” – meaning it’ll trade with the market – until investors have more clarity. The thesis has played out; time to get out.    

That being said, in the short-term, assuming the earnings call at 10:30 AM is a non-event for the price, I like BA. Although Microsoft and Google are declining pre-market despite impressive results, other parts of the market – specifically the Dow – are up. This kind of “broadening out” price action benefits BA. Furthermore, ADP Employment put a damper on yields, which bodes well for the overall market, of which BA is a part. I could see it touching ~$210 in the next couple days. However, the FOMC Meeting is a wild card. There is always the potential for the Fed to shake up the market after 2 PM.