Boeing’s stock took a hit on Wednesday, with shares falling by 2.7% to $150.48, as investors grapple with the impact of a month-long strike by the International Association of Machinists (IAM) and its implications for the company’s aircraft deliveries.
Despite delivering over 33 aircraft in September, including 27 of the popular MAX model, analysts believe the ongoing strike will significantly impact October’s delivery numbers. RBC analyst Ken Herbert highlights the positive aspect of September’s 27 MAX deliveries but expects a major drop in October due to the strike’s halt of production for the 737, 767, and 777 models.
While initial projections for 2024 MAX deliveries were around 400-450, those expectations have been revised downwards to approximately 325. Herbert emphasizes that investors are now shifting their focus to the MAX production ramp in 2025, hoping for consistent production in the high 30s per month by year-end.
Despite the strike’s impact on deliveries, Herbert believes that order activity is not a top concern for investors at the moment, particularly given Boeing’s substantial backlog. The primary focus for investors is likely to be on resolving the IAM contract, managing liquidity, and controlling cash burn during the ongoing strike.
The analyst maintains an Outperform rating on Boeing, with a price target of $220.00. However, technical indicators point to significant selling pressure on the stock, suggesting potential for further declines.
Investors seeking exposure to the aerospace and defense sector can consider alternatives like the Gabelli Commercial Aerospace and Defense ETF (GCAD) and Invesco Aerospace & Defense ETF (PPA).
The failed negotiations between Boeing and the machinists’ union, resulting in the suspension of talks, have added further financial strain to the company during this period of prolonged labor strife.
