On Friday, Boeing Co . (NYSE:BA) experienced a decline in stock value following a revised price target and ongoing labor disputes. CFRA has adjusted the 12-month price target for Boeing to $151 from the previous $174, while maintaining a Sell rating on the shares.
The adjustment comes in light of a strike by over 30,000 union members who have rejected a proposed four-year contract, leading to a cessation of airplane assembly at Boeing's Seattle and Portland facilities. The strike, which began after the union turned down a contract offer that included a 25% wage increase over four years, has disrupted production of the 737 Max, among other models.
CFRA's revised price target is based on a 20 times multiple of the projected earnings per share (EPS) for 2026, which aligns with Boeing's long-term historical forward average. The firm has also widened its anticipated loss per share for 2024 to -$4.32 from -$3.72, lowered the expected 2025 EPS to $3.80 from $4.81, and maintained the 2026 EPS forecast at $7.55.
The impact of the strike is expected to be felt in the company's 2025 earnings, as the increase in labor costs is likely to affect financial performance. CFRA noted that Boeing has faced union work stoppages five times since 1977, with the most recent one in 2008. Historically, these strikes have lasted an average of 49 days, with the shortest being 28 days.
Boeing's new CEO, Kelly Ortberg, is confronted with significant challenges, including managing the current labor situation and potentially adjusting consensus expectations in the near future. The duration of the strike remains uncertain, though CFRA assumes it will be resolved within 2024.
In other recent news, Boeing is facing potential operational and financial challenges due to an ongoing labor strike. Fitch Ratings and S&P Global Ratings have both expressed concern that the strike's duration could lead to a downgrade in Boeing's credit rating.
Adding to this, BofA Securities maintained a Neutral rating on the company amidst the labor developments, while Wolfe Research and Jefferies reaffirmed their Outperform and Buy ratings respectively, despite the potential impact of the strike.
The labor dispute, which involves the International Association of Machinists and Aerospace Workers, has been a significant point of contention.
The strike's outcome could have substantial implications for Boeing's financial health, with a potential cost of between $3 billion to $3.5 billion in cash flow if the strike lasts 50 days, according to a pre-vote note from TD Cowen.
InvestingPro Insights
As Boeing Co. (NYSE:BA) navigates through its current labor disputes and stock value adjustments, insights from InvestingPro provide a deeper look into the company's financial health and market position. According to real-time data, Boeing has a market capitalization of approximately $96.74 billion, reflecting the scale of its operations within the Aerospace & Defense industry. Despite the company's prominence, it has been trading near its 52-week low, with a price to earnings (P/E) ratio of -27.93, indicating investor concerns about profitability.
InvestingPro Tips suggest that Boeing may face difficulties making interest payments on its debt and suffers from weak gross profit margins, which are currently at 10.46%. Analysts do not anticipate Boeing will be profitable this year, and the company has not been profitable over the last twelve months. These factors, coupled with the ongoing strike, could continue to pressure the stock price. However, it's worth noting that the company is a key player in its industry, which may provide some resilience in the long term.
For investors looking for more detailed analysis, there are additional InvestingPro Tips available on the platform, providing a comprehensive view of Boeing's financial metrics and future outlook. With these insights, stakeholders can better gauge the potential risks and opportunities that lie ahead for Boeing.
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