President Xi Jinping has promised that China will buy 200 Boeing 737s. Here’s another big reason why the stock is a buy in 2026.

The recent confirmation that China would purchase 200 Model 737 aircraft from Boeing (B.A. +0.85%) This is a positive development in US-China trade relations and good news for Boeing. This helps strengthen the investment case for the stock. The key argument in favor of buying the stock in 2026 is the considerable upside potential from executing on its existing order book and contracts.

Boeing’s delay

The recent agreement with China will contribute to increasing Boeing’s delay. The existing order backlog reached a record $695 billion at the end of the first quarter. This figure represents the sum total of Boeing’s estimated revenues from 2026 to 2031.

The majority of the order book is in the commercial aircraft (BCA) segment.

Data source: Boeing presentations. Table by author.

Catching up

No one doubts that Boeing has great growth prospects due to its delay and the current recovery in commercial aeronautics, but the question is whether it will be able to achieve them profitably. It’s a valid question after years of high-profile 737 MAX groundings; manufacturing quality issues; Federal Aviation Administration (FAA) restrictions on Boeing’s production and deliveries of the 737 MAX and 787 aircraft; multibillion-dollar fees on fixed-price development contracts at Boeing Defense, Space & Security (BDS); and certification delays on the new 777X.

These challenges are best seen in Boeing’s free cash flow (FCF) generation over the past few years. I have previously discussed Boeing’s cash flow and debt problems and their impact on strategic thinking.

Today’s change

(0.85%) $1.95

Current price

$230.73

Key Data Points

Market capitalization

$182 billion

Daily scope

$226.26 -$232.29

52 week range

$176.77 -$254.35

Volume

204.1K

Average flight

7M

Gross margin

4.83%

How to think about Boeing’s cash flow

There are two ways to look at the current issues and management’s guidance for FCF between $1 billion and $3 billion in 2026. The high end of the range would put Boeing at 57.6 times 2026 FCF.

The conservative view is that the valuation reflects ongoing problems at Boeing, and until the company can demonstrate some improvement, that’s how investors should value it.

The bullish approach accepts CFO Jesus Malave’s argument, made during January’s earnings conference call, that if the temporary impacts to Boeing’s cash flow are removed, its FCF would be in the “high single-digit” $1 billion range.

Image source: Boeing.

These impacts include increased use of cash due to the delay in certification of the 777X, customer considerations due to prior delays on 737 MAX and 787 deliveries, $1 billion of cash used to support the integration of Spirit AeroSystems, a “surge” in capital expenditures in 2026 and 2027 to support the restoration of production on the 737 and 787, and the impact on cash from previous BDS charges.

Is Boeing Stock a Buy?

Ultimately, the decision depends on whether you believe these temporary factors are truly “temporary” or whether they are part of a set of lasting problems that will continue to dog Boeing.

Image source: Getty Images.

On the positive side, CEO Kelly Ortberg (appointed in summer 2024) has increased the delivery pace of Boeing’s 737, and BDS is tackling its most difficult defense contracts. The investment in Spirit is expected to strengthen Boeing’s supply chain, and increased deliveries of the 737 and 787 are expected to improve FCF margins.

Boeing probably deserves the benefit of the doubt here, and its growing delay and recent China deal add new execution opportunities, but it’s understandable that more skeptical investors would want to see more evidence of operational improvement before buying.

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