By Al Root
The 737 MAX jet, it appears, isn't longer a thing for Boeing investors. At least that's what the market is signaling.
With Federal Aviation Administration test flights now under way, the 737 MAX's return to service appears imminent, ending one phase of a monthslong drama for the troubled jet. As a result, Boeing shares (ticker: BA) are up -- a lot -- over the past month.
The MAX has been grounded worldwide since mid-March 2019, following two deadly crashes inside of five months. The company has been working with regulators on several fixes which are being tested -- in the air -- by FAA pilots this week.
"After the days of certification flights, there will be extensive post-flight analysis," wrote UBS analyst Myles Walton in a Wednesday research report, "along with the convening of [regulators] to validate the training protocols being proposed by the FAA." He now believes the plane will be back in commercial service by October.
Boeing's recent stock gains appear to be MAX-related because of the relative change in other aerospace stocks. Boeing shares are up more than 20% over the past month, while aerospace supplier stocks Barron's tracks are flat. The Dow Jones Industrial Average and S&P 500 are up 1.1% and 0.9%, respectively, over the same span.
The move has added some $20 billon in market value to Boeing shares. That's roughly half of 2019's losses related to the MAX grounding. The entire aerospace value chain is down roughly 40% to 50% in 2020.
Yet the MAX saga isn't quite over yet, even if investors are less concerned. For one thing, there are still canceled orders to deal with. Norwegian Air Shuttle (NAS.Norway) recently canceled its MAX jet order. Boeing may have to give back deposit cash. "We are not going to comment on commercial discussions with our customers," a Boeing spokesperson told Barron's in an emailed statement. "Norwegian Air Shuttle is a longstanding Boeing customer. As with many operators dealing with a very challenging time, we are working on a path forward."
It isn't great news, but Boeing still has thousands of MAX jets in its order backlog. What's more, Norwegian is struggling, taking government money to help it navigate the viral pandemic.
Reuters reports that Boeing didn't inform regulators of changes to flight control software implicated in both deadly crashes. The revelation, based on a U.S. Department of Transportation audit, is new. The news, however, isn't moving the stock because both the malfunctioning software and Boeing's actions have been at the center of the storm from the beginning of MAX products.
Boeing, responding to questions about the DoT report in an emailed statement, thanked the agency for its efforts and reiterated the company's commitment to transparency and safety. Boeing stock is down 0.4%, at $182.63, in recent trading. The S&P 500 is up 0.6%.
"You have to take the good with the bad with Boeing," wrote Walton. That feels like an apt statement. The analyst, for his part, rates shares the equivalent of Hold and has a $150 price target for the stock, below where shares are trading.
Recent share gains have pushed Boeing, a Dow component, above most Street estimates. The average target price is about $180 a share. It's rare for large-cap stocks to trade above analyst target prices. The average target price for stocks in the Dow implies gains of about 9%. Only four out of 30 have price targets above where stocks are trading.
Analyst price targets usually mean where analyst expect the stock to trade over the next 12 months or what the price of shares should be to earn a "normal" market return over time. |
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发表于 2020-7-1 01:34 PM
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