Boeing's 737 Turbulence - BofA Analyst Sees Light At The End Of The Runway

BofA Securities analyst Ronald J. Epstein reiterates a Neutral rating, with an unchanged price target of $225 on Boeing Co BA and revised estimates following its 737 production halt.

The analyst says that the freezing of 737 production by the FAA will put significant pressure on Boeing’s 2025/2026 production and FCF targets. 

However, the forced slowdown will ultimately benefit Boeing in the long term, and the resulting stronger production system will drive 737 rates beyond 50 more effectively with less rework, writes the analyst.

Also, the analyst expects the strong demand & duopoly to support mid-term market share. 

Consequently, the analyst raised EPS estimates to $0.70 from $0.25 in FY24 and $6.55 from $6.35 for FY25 while lowering forecasts to $8.90 from $9.15 in FY26.

Today, Boeing shares dipped as it reportedly discovered new quality defects in its 737 Max airplanes.

Boeing announced on Sunday that it had identified two mis-drilled holes on the fuselages of around 50 undelivered 737 MAX planes, Reuters reported. The defects were discovered by Boeing's supplier, Spirit AeroSystems Holdings Inc SPR, which could potentially delay near-term deliveries.

Last month, Boeing reported a fourth-quarter revenue increase of 10% year-over-year to $22.02 billion, beating the consensus of $21.10 billion. Adjusted loss per share contracted to $(0.47) from $(1.75) in same quarter 2022, beating the consensus of $(0.78).

Boeing’s CEO Dave Calhoun says the full focus is on taking comprehensive actions to strengthen quality at Boeing.

Related: Boeing CEO Dave Calhoun Has A Clear Message For Everyone: ‘Boeing Owns It’

Price Action: BA shares are down 1.98% at $205.24 on the last check Monday.

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