Boeing’s Troubles in a Nutshell

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When Boeing Co. (NYSE: BA) reported its massive second-quarter loss on Wednesday, no one was terribly surprised. The company’s struggle to recover from the effects of two fatal crashes of its new 737 Max since last October seems to add a new wrinkle every week.

The company had hoped to have its best-selling aircraft recertified for flight by now but has been forced by events to acknowledge that recertification won’t happen until the end of the current quarter, at best. Worse news was coming on the conference call following the release of second-quarter results.

CEO Dennis Muilenburg said that if the current timetable for getting the 737 Max off the ground is delayed, the company may have to cut back further on its current reduced production rate of 42 planes a month. Even worse, the company may be forced temporarily to shut down the production line completely. Muilenburg said that temporary shutdown could be “more efficient than a sustained slower production rate.”

Getting the 737 Max recertified and back flying is Boeing’s top priority. The longer that takes, the more it will cost Boeing and its shareholders.

Boeing’s second problem lies in the engines for the company’s new dual-aisle 777X commercial jet. Deliveries of the engine, built entirely by General Electric Co. (NYSE: GE), have been delayed due to a variety of technical problems. First test flights have been delayed until early next year, threatening the new plane’s scheduled first customer delivery in late 2020.

Thursday morning, Defense News reported that Boeing had withdrawn from consideration for a lucrative contract to replace the U.S. Air Force’s Minuteman III missile force. Boeing and Northrop Grumman Corp. (NYSE: NOC) had been awarded contracts to prepare bids on the replacement in August 2017 after Lockheed Martin Corp. (NYSE: LMT) was eliminated from bidding on the project.

Boeing issued the following statement:

After numerous attempts to resolve concerns within the procurement process, Boeing has informed the Air Force that it will not bid Ground Based Strategic Deterrent (GBSD) Engineering and Manufacturing Development (EMD) under the current acquisition approach. We’ve evaluated these issues extensively, and determined that the current acquisition approach does not provide a level playing field for fair competition.

Boeing had complained to the Air Force of what it saw as Northrop’s unfair advantage in the competition for the contract.

Add all those items together and it’s not too difficult to figure out why Boeing’s stock price dropped nearly 4% on Wednesday and traded down more than 4% more in the mid-morning on Thursday at $346.35, in a 52-week range of $292.47 to $446.01. The consensus 12-month price target on the stock is $414.19.

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