Boeing (BA) - Get Report could take a charge of more than $5 billion as the fallout from the grounding of its beleaguered 737 MAX plane stretches to nearly a year, analysts at Canaccord said in a note Friday.
The firm cut Boeing’s price target to $350 a share from $370. Analyst Ken Herbert expects the Seattle aerospace giant to take the charge in its fourth-quarter earnings.
The charge could reflect changes to accounting block cost assumption as well as additional customer concessions, according to Herbert, leading to his more than $5 billion estimate.
“Now is the time for new CEO [Dave] Calhoun to get as much bad news out as possible and to provide the company with some additional buffer heading into 2020,” Herbert said.
In the same note, Canaccord also pared its target on Spirit AeroSystems (SPR) - Get Report, the contractor that builds the 737 MAX. Boeing ordered the Wichita, Kan., company to stop building the plane while it is grounded and orders have dried up.
Spirit’s price target was cut to $74 from $88 as Canaccord expects the ramp-up in production to be more gradual than smooth once the MAX is again ready to go.
Spirit AeroSystems will gradually increase the rate of production in the second half of the year, but will not reach its previous rate of 52 planes produced a month until 2022, Canaccord estimates.
Spirit AeroSystems shares at last check were up 0.3% to $68.20 while Boeing shares fell less than 1% to $328.88.