Boeing's Production Delays Not Unexpected, Analyst Says

Boeing Company BA shares are trading lower on Wednesday. On Tuesday, Boeing stated that it delivered 40 commercial jets in August, five more than in the same month of 2023 when a manufacturing defect affected 737 MAX production.

Of total count, Boeing delivered 32 MAX aircraft in August (up from 31 in July), which includes nine deliveries to customers in China, reported Reuters.

Goldman Sachs analyst Noah Poponak writes that deliveries stayed higher in August, following low levels earlier in the year due to a focus on product quality controls.

The analyst anticipates continued delivery increases in the second half of 2024, reflecting improved performance in the third quarter.

Also, Airbus SE EADSY CEO Guillaume Faury announced that the company plans to launch a new aircraft program by the end of the decade, reported Reuters.

BofA Securities analyst Ronald J. Epstein says that Faury estimated that the next-generation aircraft would reduce fuel consumption by 25% compared to the A320, suggesting that an open-rotor engine design could be an option.

Epstein adds that the “A220XLR” has been a topic of speculation, and this announcement adds credibility to the program.

If Boeing responds to Airbus’ announcement, it could have significant implications for the company and impact Boeing’s balance sheet, writes the analyst.

Apart from this, on Tuesday, Boeing informed suppliers of a six-month delay in a key production milestone for its 737 MAX. The new target is to reach a monthly output of 42 jets by March 2025.

Truist Securities analyst Michael Ciarmoli says that consensus estimates of around 32 MAX aircraft per month in fourth-quarter suggest that the delay in production rate increases was anticipated.

The analyst added that this delay, while not unexpected by the supply chain, is likely to strain suppliers who are already managing substantial inventory related to the program.

Investors can gain exposure to the stock via IShares U.S. Aerospace & Defense ETF ITA and Gabelli Commercial Aerospace and Defense ETF GCAD.

Price Action: BA shares are down 1.21% at $158.13 at the last check Wednesday.

Photo via Shutterstock

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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.