Barclays reaffirmed its Equalweight rating on Boeing shares (NYSE:BA), maintaining a $190.00 price target. The update follows the latest delivery figures for Boeing's 737 MAX aircraft. According to the firm's estimates, Boeing has delivered 84 MAX planes in the third quarter, including 18 from storage. Notably, 18 of these deliveries were to China. This compares to 14 out of 69 MAX deliveries in the second quarter and 13 out of 66 in the first quarter with 17 and five to China respectively.
The report also highlighted that Boeing made three MAX deliveries since the start of the IAM union strike, which commenced at midnight on September 12, 2024. Since the resumption of MAX deliveries in late 2020, after the lifting of the grounding order, approximately 30% of the estimated 1,250 delivered MAX aircraft came from storage. The analyst noted that around 80 aircraft, reduced from an initial estimate of approximately 450, remain in storage.
These represent about 45% of the total MAX inventory, with many of these aircraft earmarked for Chinese airlines and having been parked for an average of four to five years.
The inventory assessment also indicated that of the remaining MAX planes, approximately 95 that have been produced post-grounding, around 55% are intended for North American airlines and 30% for Chinese carriers. About 65% of these have been parked for over a year.
The production rate of the MAX has been tracked through first flights off the production line, suggesting an increase to roughly 17 per month, up from around 15 per month during most of July and August. The firm also reported two first flights since the IAM union strike began.
Boeing has been under scrutiny from a U.S. Senate Subcommittee and the Federal Aviation Administration (FAA) over safety concerns and regulatory oversight. The Senate Subcommittee highlighted issues such as pressure on Boeing workers to prioritize production speed over quality, inadequate training, and questionable quality inspection procedures.
In response, the FAA has restricted Boeing from increasing MAX production until substantial quality improvements are made. The FAA is also maintaining continuous engagement with the Department of Justice (DOJ) to promptly report any potentially criminal activities by Boeing.
Meanwhile, Boeing is facing labor disputes with striking workers on the U.S. West Coast. The aerospace giant has extended the timeline for these workers to consider a new labor offer, which includes enhancements such as the reinstatement of a performance bonus, improvements to retirement benefits, and an increase of the ratification bonus to $6,000. Analysts from TD Cowen have maintained a positive outlook on Boeing, reiterating a Buy rating, despite these ongoing negotiations.
The FAA anticipates that Boeing's safety culture enhancement could be a prolonged endeavor, potentially spanning three to five years. As the investigation continues, the FAA, DOJ, and Boeing are cooperating to address these safety and oversight challenges.
InvestingPro Insights
Boeing's (NYSE:BA) position in the Aerospace & Defense industry remains prominent, yet the company faces challenges reflected in its financial metrics and analyst expectations. With a market capitalization of approximately $94.72 billion, Boeing is trading near its 52-week low, indicating potential undervaluation concerns among investors. The company's gross profit margin over the last twelve months as of Q2 2024 stands at 10.46%, which aligns with the concerns raised by InvestingPro about Boeing's weak gross profit margins.
Additionally, Boeing's stock price volatility is noteworthy, as evidenced by the 1-month and 3-month price total returns of -10.95% and -11.02%, respectively. This volatility is a critical factor for investors to consider, especially in light of the 40.22% year-to-date price total return, which underscores the stock's underperformance. Analysts have revised their earnings downwards for the upcoming period, signaling caution regarding Boeing's profitability. Despite these challenges, the company's recent delivery figures for the 737 MAX aircraft, including a notable number to China, suggest ongoing demand and operational progress.
For investors seeking a more in-depth analysis, the InvestingPro platform offers additional insights, including 10 more InvestingPro Tips on Boeing's financial health and future prospects. Visit InvestingPro for a comprehensive understanding of Boeing's investment potential.
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