"Boeing Needs to Resolve Exposed Negative Factors for Stock Price Rebound"

[Asia Economy Reporter Minji Lee] As Boeing announced disappointing third-quarter results, there is a forecast that resolving exposed negative factors, such as the Chinese government's resumption of 737 Max operations, is necessary for a stock price rebound.

According to the financial investment industry on the 30th, Boeing's stock price recorded $207.03, down 5.87% this month. It is analyzed that the stock price reflects the announcement of third-quarter results below market expectations and the presence of negative issues that could suppress the stock price.

Boeing posted third-quarter sales of $15.3 billion and an operating profit of $59 million. Sales grew 8.1% year-on-year, and operating profit turned positive, but it fell significantly short of the market expectation of $565 million. Seongjin Ji, a researcher at Kiwoom Securities, said, "The main reason for the large shortfall from consensus was the $183 million cost related to defects in the 787 model and the $185 million cost related to the failure of the manned spacecraft program test launch and defects."

By division, the Commercial Airplanes (BCA) division delivered a total of 62 737 Max aircraft, increasing aircraft sales revenue. However, due to prolonged delivery suspension of the 787 aircraft model caused by parts defect issues, the division posted poor results. The Defense & Space (BDS) division recorded solid performance in defense business but saw operating profit margin sharply decline to 6.6% due to recognition of costs related to defects in the manned spacecraft program. The Global Services (BGS) division maintained solid results as demand for aircraft maintenance focused on domestic routes and freighter conversions increased.

Improvement in performance is expected to occur after the Chinese regulatory authorities approve the resumption of 737 Max operations and the U.S. Federal Aviation Administration (FAA) permits the resumption of 787 deliveries. In September this year, the Chinese regulatory authorities successfully completed test flights of the 737 Max, and it is predicted that operation resumption approval will be granted by the end of the year. However, the FAA's approval for resuming 787 deliveries is expected to take an additional approximately five months, and the exact timing of delivery resumption remains uncertain.

As of the end of the third quarter, the company holds inventory of 370 completed 737 Max aircraft and 105 787 aircraft. Since about one-third of the 370 Max aircraft inventory is understood to be for Chinese airline customers, if the Chinese regulatory authorities grant operation approval by the end of the year, aircraft deliveries are expected to accelerate starting from the first quarter of next year.

Researcher Seongjin Ji said, "If deliveries of the Max model fully resume from next year, production, currently at about 19 units per month, is planned to increase to 31 units," adding, "For the 585 model, whose production was reduced from 5 to about 2 units per month due to airframe defects, production will increase again once deliveries resume."