Al Root
Boeing is starting to show progress in its turnaround plans. So why is the stock still tanking?
Shares of the plane maker closed at $139.10 on Wednesday, the first time shares have closed below $140 since October 2022 and below the $143 level that Boeing recently sold stock.
New CEO Kelly Ortberg has a list of things he wants to accomplish to turn around the struggling company.
Struggling might understate things. Entering Thursday trading, Boeing stock was down almost 70% from its all-time closing high reached in early 2019 shortly before the second deadly 737 MAX crash. The incident led to the worldwide grounding of all MAX jets between March 2019 and November 2022.
Boeing hasn't fully recovered from its MAX problems and Covid-19. It hasn't reported a full-year profit since 2018. Including interim leadership, Ortberg is the fourth CEO since the MAX crashes.
Getting workers back to work is one of Ortberg's goals. Workers ratified their new four-year labor contract on Nov. 4, ending a 50-plus day contentious strike. Workers rejected two contract offers before the third vote was a yes.
Along with labor, repairing Boeing's balance sheet was also on his to-do list. That happened: In October, Boeing raised more than $20 billion by selling equity and equity-linked securities.
Supplier Spirit AeroSystems has run into more trouble and requires another cash infusion from Boeing. That isn't a shock: Spirit Aero generates most of its business from Boeing and its cash flow dried up during the strike. Boeing is still set to acquire Spirit AeroSystems in 2025. The purchase, agreed to in July, is also part of Ortberg's turnaround and is intended to give Boeing more control over production quality.
The biggest factor in the recent decline in shares just might be the election. President-elect Trump has promised tariffs on China. A trade war with China would hit Boeing more than just about any other company. China is a big buyer of planes and an estimated 25% of Boeing's undelivered backlog will end up in China.
How the trade relationship with China will develop under Trump is anyone's guess. Curiously, Tesla CEO Elon Musk could play an important role. Musk backed Trump's bid for the White House and is now serving in a consulting role in the newly created Department of Government Efficiency.
China matters, a lot, for Tesla, accounting for roughly one-third of all sales. "Mr. Musk is very popular in China and Tesla is the only foreign automaker relevant in the EV market," wrote Deutsche Bank analyst Edison Yu, who rates Tesla shares Buy, in a recent report. "Could his influence facilitate some type of win-win reconciliation?" Any agreement that benefits Tesla could benefit Boeing, too.
Investors should watch Tesla's stock chart in the meantime. Boeing is trading below recent support levels. If shares don't turn higher, a drop to $120 is in play, according to CappThesis founder and market technician Frank Cappelleri.
He isn't making a fundamental call on Boeing stock. He's looking at stock charts to get a sense of where investors have bought and sold stock in the past. Right now they are selling like they haven't before.
Boeing stock was up 0.2% in early Thursday trading at $140.28 a share. The S&P 500 and Dow Jones Industrial Average were down about 0.1%.
Write to Al Root at allen.root@dowjones.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
November 14, 2024 10:35 ET (15:35 GMT)
Copyright (c) 2024 Dow Jones & Company, Inc.
Comments