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Boeing Shares Stutter Amid Downbeat Q4 Results

The news shaping the markets today

Australia’s Westpac-Melbourne Institute Leading Economic Index fell 0.03% year-over-year in December, after 0.21% growth in November. The index turned negative for the first time in three months, exerting pressure on the AUD/USD forex pair.


Taiwan’s consumer confidence index rose to a three-month high of 73.67 in January, from 73.02 a month ago. However, the TWD/USD pair declined in forex trading this morning due to strength in the US dollar after the Fed indicated a possible rate hike in March.


The Philippines economy expanded 7.7% in the fourth quarter, versus 6.9% growth in the previous quarter. Despite the figure exceeding market expectations of 6% growth, the PHP/USD forex pair came under pressure due to the steep rise in the US dollar index.


China’s industrial profits grew 34.3% year-over-year to 8.71 trillion yuan in 2021, versus 38.0% growth in the January to November period. Profit growth slowed for the tenth month in a row, sending the CNY/USD pair lower in forex trading this morning.


Russia’s producer inflation fell to 28.5% year-over-year in December, versus a five-month high of 29.2% in the earlier month. However, the RUB/USD forex pair remained flat after the news.

 

What’s happening: Shares of Boeing fell on Wednesday, after the company reported its fourth-quarter results short of market expectations.

What happened: The plane maker swung to a loss in the fourth quarter after two quarters of profits.

However, Boeing was still cash flow positive in the quarter, which was its first quarter with positive cash flows since early 2019.

How were the results: The Chicago, Illinois-based company reported a decline in revenues for the fourth quarter, with both top- and bottom-line metrics missing market views.

  • Revenues fell 3.25% year-over-year to $14.8 billion and came in below the consensus estimate of $16.59 billion.
  • Adjusted core loss was $7.69 per share, versus a year-ago loss of $4.19 per share. The figure was much worse than the Street expectations of 42 cents per share.

Why it matters: Boeing recorded a loss due to a pre-tax non-cash charge of $3.5 billion on its 787 Dreamliner program. The company said it expects abnormal costs related to 787 to be around $2 billion, versus its previous estimate of $1 billion.

Boeing posted a core operating loss of $4.54 billion for the quarter, versus a year-ago loss of $8.38 billion. However, the company still generated positive cash flows in the quarter, driven by deliveries of 737 MAX amid a recovery in air travel.

The company’s free cash flows came in at $494 million last quarter, versus -$4.27 billion in the year-earlier period. Boeing’s operating cash flows grew to $716 million, versus a cash burn of $4.01 billion in the same quarter in 2020.

Boeing delivered 340 commercial airplanes during the year, with 99 of these being delivered in the fourth quarter, versus 59 in the year-ago period. The company has an inventory of 335 737 MAX planes and expects to deliver the majority of these by the end of 2023. The company is currently producing 27 737 MAX planes per month and is looking to increase production to 31 per month early this year.

“2021 was a rebuilding year for us as we overcame hurdles and reached key milestones across our commercial, defense and services portfolios. We increased 737 MAX production and deliveries, and safely returned the 737 MAX to service in nearly all global markets,” CEO David Calhoun said during the earnings call.

The company is looking to resume deliveries of 787 and 777X, provided it gets the required approvals from the US FAA (Federal Aviation Administration).

How shares responded: Boeing’s shares fell 4.8% to close at $194.27 on Wednesday. The stock has lost around 13% over the past six months.

What to watch: Investors will keep an eye on the resumption of services of Boeing’s 737 MAX in the world’s biggest aircraft market, China, after this jet was grounded in 2019 by the Civil Aviation Administration of China amid crashes in Indonesia and Ethiopia.

Investors will also monitor approvals for 787 and 777X. Some reports suggest deliveries of the 787 could remain frozen for months with US regulators inspecting structural flaws. The designs for the 777X also faces regulatory concerns in Europe.

The markets today

Crude oil will be in focus today after recording sharp gains on Wednesday

 

Context: Crude oil moved higher on Wednesday, with Brent hitting $90 per barrel for the first time in seven years.

Details: The surge in oil prices was driven by supply concerns and rising geopolitical tensions.

Around 100,000 troops have been deployed by Russia on Ukraine’s border, fuelling fears of an invasion. Markets are also concerned about the rising tensions causing an interruption to Russia’s supply of gas to Europe.

On the other hand, OPEC+ (Organization of the Petroleum Exporting Countries and allies) members have not been able to meet monthly output targets, while energy demand remains elevated. The OPEC+ is scheduled to hold a meeting on February 2 to decide on a further production increase.

The EIA released data on Wednesday showing an unexpected increase in US crude inventories of 2.377 million barrels in the recent week, versus expectations of a contraction of 0.728 million barrels. Meanwhile, gasoline inventories have expanded to their highest level in around a year.

Brent crude for March delivery jumped $1.76, or around 2%, to close at $89.96 per barrel on Wednesday. Earlier in the session, the global benchmark breached the $90 resistance level for the first time since October 2014, but could not hold those gains. US WTI crude for March delivery gained $1.75, or around 2%, to settle at $87.35 per barrel.

In other energy trading, wholesale gasoline for February delivery gained 6 cents to reach $2.52 a gallon, while February natural gas added 23 cents to close at $4.28 per 1,000 cubic feet on Wednesday.

What to watch: Traders await the EIA’s report on US natural gas stockpiles. Inventories had contracted by 206 billion cubic feet in the week ending January 14 and are expected to decline further by 216 billion cubic feet in the latest week.

Other Markets: European trading indices closed higher on Wednesday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 Index up by 1.33%, 2.22%, 2.11% and 1.68%, respectively.

Support & resistances for today

Technical Levels News Sentiment
Nasdaq 100 – 14,094.56 and 14,215.74 Positive
WTI Crude Oil – 86.60 and 87.00 Positive
Natural Gas – 4.005 and 4.020 Positive
USD/JPY – 114.50 and 114.60 Positive
GBP/USD – 1.3438 and 1.3445 Negative

Market snapshot

What else to watch today

Germany’s GfK consumer climate indicator, Spain’s unemployment rate, Italy’s industrial sales, South Africa’s producer price inflation and South African Reserve Bank interest rate decision, Canada’s CFIB’s business barometer long-term index and average weekly earnings, Turkey’s foreign exchange reserves and Central Bank of Turkey’s meeting summary, UK’s CBI distributive trades survey’s retail sales balance, Mexico’s balance of trade, as well as US durable goods orders, GDP growth rate, initial jobless claims, continuing jobless claims, PCE prices, pending home sales, and Kansas Fed manufacturing index.


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