Baird has reaffirmed its Outperform rating on Boeing (NYSE: NYSE:BA) with a steady price target of $240.00 despite the ongoing strike that has now extended into its fourth week.
The aerospace company is engaged in a challenging situation as negotiations with the International Association of Machinist (IAM) 751 union have come to a halt.
The firm's analyst pointed out the critical nature of the current labor dispute, emphasizing the need for Boeing to resolve the issue promptly. This is essential for the company to proceed with a significant equity raise of more than $10 billion, which is crucial to avoid a potential credit downgrade.
Although the discussions have broken down, there is an expectation for them to resume next week. The outcome of these renewed talks could potentially include a 40% pay increase and a cash payment to the union members, but no pension benefits are expected to be part of the deal.
The analyst also noted that due to the uncertainty surrounding the strike and the pending equity raise, the previous designation of Boeing as a bullish fresh pick has been removed. This change reflects the current unpredictability of the situation and its potential impact on the company's financial strategy.
The ongoing strike has undoubtedly put Boeing in a difficult position, as it seeks to balance the demands of its workforce with the financial imperatives of raising capital and maintaining its credit standing. The company's ability to navigate through these challenges will be closely watched by investors and industry observers alike.
In other recent news, Boeing has been grappling with several significant developments. The company's earnings report is approaching amidst a challenging labor dispute with the IAM 751 union, as highlighted by Wells Fargo.
The firm maintained its Underweight rating on Boeing with a $110 target. The ongoing strike and unsuccessful negotiations have raised concerns about Boeing's financial health, with an estimated additional ~$2 billion cash hit expected for the company.
Furthermore, S&P has placed Boeing's credit rating on CreditWatch due to the ongoing strike and its negative implications on the company's financials and operational performance. This follows Boeing's withdrawal of its previous pay offer to the union, potentially prolonging the strike and impacting the company's manufacturing operations.
Despite these challenges, Boeing reported 65 gross orders in September, contributing to a year-to-date gross order tally of 315 as of September 30. However, the company saw a decrease in jet deliveries for the same month due to the ongoing strike. The company disclosed its major program deliveries for the third quarter of 2024, delivering a total of 116 airplanes in the commercial sector and 34 units in the defense sector.
Lastly, Boeing is under investigation by Italian prosecutors over suspected defective parts used in the 787 Dreamliner aircraft. The parts, produced by an Italian firm for Boeing, were found to be made from lower-cost, non-compliant materials, potentially impacting aviation safety.
InvestingPro Insights
As Boeing navigates through its labor challenges and potential equity raise, InvestingPro data provides additional context to the company's financial situation. Boeing's market capitalization stands at $92.04 billion, reflecting its significant position in the aerospace industry. However, the company's financial health shows some concerning signs.
InvestingPro Tips highlight that Boeing may have trouble making interest payments on its debt, which aligns with the article's mention of a potential credit downgrade. This underscores the importance of the planned equity raise. Additionally, the company is not profitable over the last twelve months, with a negative P/E ratio of -32.44, supporting the analyst's concerns about Boeing's financial strategy.
The stock's recent performance has been challenging, with InvestingPro data showing a 42.7% year-to-date price decline. This downward trend is consistent with the article's discussion of the ongoing strike and its potential impact on investor sentiment.
For readers seeking a more comprehensive analysis, InvestingPro offers 11 additional tips on Boeing's financial outlook and market position. These insights could prove valuable in understanding the full scope of Boeing's current situation beyond the labor dispute.
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