Boeing Should Pick Up Aircraft Production Soon After Strike End, Analyst Says

Boeing Co BA should be able to quickly ramp up aircraft production once the strike ends, according to an analyst.

Goldman Sachs analyst Noah Poponak said he expects the strike, which began on Sept. 13, will end soon, though the International Association of Machinists and Aerospace Workers, a union representing roughly 33,000 Boeing workers, rejected the company’s “best and final offer” on Monday.

 “IAM workers at Boeing are on strike, though we expect a resolution soon, and for Boeing to be able to pick back up its aircraft production and delivery momentum,” Poponak wrote in a note Tuesday.

“Deliveries the last few months have improved and September was tracking quite strong before the strike.”

The striking machinists produce the 737 Max, Boeing's top-selling airliner, the 777 jet and the 767 cargo plane.

On the same day the strike began, Moody’s Investment Ratings said it would look at how the strike would impact the company’s production and cash flow while maintaining the lowest investment-grade rating for the company.

Read Also: Boeing ‘In A Death Spiral Of Their Own Making’ According To A Consultant As ‘Employees Already Have A Dim View Of Management’

“Boeing is therefore likely considering options to raise capital to maintain its credit rating, and more debt does not solve near-term concerns,” Poponak wrote.

“We assume Boeing raises $12bn of equity before year-end, which matches the total maturities due in 2025 + 2026, and keeps the cash balance well north of $10bn in the near-to-medium-term while they ramp back up commercial deliveries and strive to resolve defense profitability.”

He said raising $12 billion in equity in the fourth quarter would put the company’s cash balance at or above $20 billion, which would give Boeing “ample cushion” providing ample cushion as new CEO Kelly Ortberg comes in and starts to lay out a strategic path forward. 

“While BA continues to face several challenges to work through near-term, we see attractive valuation relative to long-term fundamentals and are Buy rated on the stock,” Poponak said.

BA Price Action: Boeing declined 0.30% to close at $155.81 on Tuesday.

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