Boeing is facing a critical juncture with its production plans and labor negotiations. Analyst Ronald J. Epstein, from BofA Securities, maintains a Neutral rating on Boeing, with a price forecast of $200. However, he underscores the company’s vulnerability, particularly with the recent delay in its 737 production rate increase from September 2024 to March 2025. The current strike by 33,000 aircraft assembly workers, represented by the International Association of Machinists and Aerospace Workers (IAM), further complicates the situation.
Epstein acknowledges the potential for a prolonged strike to exacerbate Boeing’s challenges. However, he also suggests a possible resolution within a week, drawing parallels with previous contract negotiations and precedents. He anticipates that Boeing may need to offer concessions, potentially approaching the IAM’s initial demand for a 40% wage increase.
To address the escalating tension, Boeing’s CEO Kelly Ortberg and COO Stephanie Pope have issued internal memos, aiming to mitigate the strike’s impact. Pope highlighted the proposed contract as a “best ever” for Boeing, emphasizing a 25% wage increase despite the company’s substantial $60 billion debt. Ortberg acknowledged the company’s current difficulties, partially attributed to past mistakes, and cautioned that a strike could jeopardize their ongoing recovery efforts.
The analyst emphasizes the importance of Boeing taking proactive steps to resolve the issues and minimize disruptions. Boeing’s stock price has taken a hit, with shares trading lower by 3% at $157.87 following the rejection of the proposed labor contract. Moody’s has placed Boeing’s ratings under review for a potential downgrade, reflecting concerns about the ongoing strike.
Investors seeking exposure to Boeing can explore options like the iShares U.S. Aerospace & Defense ETF (ITA) and the Gabelli Commercial Aerospace and Defense ETF (GCAD). The strike’s impact on Boeing’s production schedule, financial stability, and stock performance remains a significant concern, highlighting the complex challenges facing the company.
