Boeing’s stock is trading nearly flat on Tuesday amid concerns about the company’s ability to meet its 737 MAX production goals. Analysts from Moody’s and S&P have expressed skepticism regarding Boeing’s target of producing 38 MAX jets per month by 2024. They attribute these concerns to potential labor disruptions and Boeing’s history of falling short of its production targets.
Despite these challenges, Moody’s and S&P do not anticipate an immediate credit downgrade to junk levels. Jonathan Root, Moody’s lead analyst on Boeing, predicts the company will reach a production rate of 32 MAX jets per month by the end of 2024, with the 38-jet target potentially achieved in the second half of 2025.
Ben Tsocanos, aerospace director at S&P Global Ratings, emphasizes the importance of stabilizing MAX production to generate free cash flow, which is crucial for maintaining Boeing’s credit rating. “We see risks to reaching that number (38), including labor negotiations and the company’s history of underdelivering relative to targets,” he stated.
Boeing has responded to these concerns by citing its finance chief’s statement that production will reach 38 planes per month by the end of 2024. However, analysts at William Blair speculate that the new CEO, Kelly Ortberg, might lower the target to prioritize quality over quantity.
Ronald J. Epstein, an analyst at BofA Securities, maintains a Neutral rating on Boeing. He cites reports from Aero Analysis Partners/AIR indicating that Boeing delivered 4-6 737s as of August 8, consistent with previous months’ numbers. Inventory levels have decreased to 183 undelivered 737s from 187 the previous week. Additionally, Epstein notes that deliveries this month include 2 787s and 1-3 767s.
Last week, Ray Goforth of the Society of Professional Engineering Employees in Aerospace reported a slowdown at Boeing’s Renton 737 facility due to issues with junction boxes. Boeing confirmed that three delivered airplanes contained non-conforming components and have been grounded, potentially delaying future deliveries.
Investors can gain exposure to Boeing through ETFs like the Gabelli Commercial Aerospace And Defense ETF (GCAD) and the iShares U.S. Aerospace & Defense ETF (ITA).
At the last check on Tuesday, BA shares were down 0.58% at $163.18.
