Over the past few years, Boeing, one of the world's largest aerospace and aviation manufacturers, has faced significant reputational and financial performance challenges.
Starting with financials, the company has been reporting negative earnings per share (EPS) since 2019. And the figures were much worse than expected in four out of five cases.
It looked like things might turn around after 2023, but circumstances continued to worsen. In particular, there have been continuous reports of problems with their aircraft.
In January this year, a part of the fuselage detached from a Boeing 737 MAX 9 at an altitude of about 5 km. In February, a wing section detached from a Boeing 757-200 during flight.
In March, a Boeing 787 suffered a sudden loss of altitude, injuring 50 people. In April, a Southwest Airlines Boeing 737-800 engine cowling detached in mid-flight.
Recently, during takeoff from Los Angeles airport, a wheel came off the main landing gear of a Boeing 757. It does seem like a run of bad luck.
It might seem that the company is cursed, but as the court concludes, its irresponsible approach to security and to doing business in general is to blame.
As a result, instead of trying to prove its innocence, Boeing agreed to settle with the US Department of Justice and admitted its guilt of fraud.
What does this mean for the future?
What worries investors most is that this decision "potentially threatens the ability to sign contracts with the US Department of Defense and NASA."
The good news is that the settlement allows the company to avoid a major lawsuit in the future. As a result, the company's shares reacted slightly positively instead of falling further.
However, despite the record performance of the S&P 500, there is still no talk of an uptrend.
This is because US government contracts, including foreign military sales, accounted for 37% of revenues last year. Their loss would, therefore, be a major blow.
Still, many expect Boeing to remain a key supplier of defense and space products. For other countries, however, the question remains open.
For example, Britain and the European Union have regulations preventing contractors with criminal convictions from bidding for public contracts in various sectors for specific periods.
What can we expect now?
It is still too early to tell whether all the negative news has been fully considered in stock prices. Given the trend, further catastrophes could further scare off investors.