Boeing Co. (BA) may be facing a near-term challenge for the production of its 737 aircraft, but analysts and investors are not too worried and believe the aerospace and defense company is back on track.
The production struggles for the 737 aircraft dominated the conversation at the company's annual investor day in Seattle, according to analysts at Credit Suisse, Jefferies and Canaccord Genuity. Boeing's Chief Financial Officer Greg Smith last month disclosed that Boeing expected delivery delays of the narrowbody aircraft, and, on Tuesday, reports that supplier bottlenecks threatened the 737 production renewed Wall Street's concerns. Management, however, largely assuaged those worries at its investor day, sending the stock higher on Thursday, Sept. 6.
Shares of Boeing gained 1.5% to $351.93 at 1:30 p.m. New York time.
"Despite a [near-term] 737 delivery slowdown, an end of year recovery appears in sight," Jefferies analyst Sheila Kahyaoglu wrote in a research note. "Supply chain issues with regards to the 737 rate increase appear to be improving as BA has added 600 engineers and factory floor workers to recover from fuselage and engine delays."
Kahyaoglu raised her price target from $400 to $410 and maintained the Buy rating on the stock.
Canaccord Genuity analyst Ken Herbert said while management indicated a "light" third quarter for 737 deliveries, Boeing anticipates hitting its full-year target with a strong fourth quarter. Still, Herbert hedged management's optimism, saying he puts the odds at 50% that Boeing will succeed with its recovery plan by the end of the year, as some suppliers have indicated that the delays could spill into 2019. Canaccord maintained its Hold rating and its $350 price target.
While the 737 deliveries challenge remains a work in progress, Credit Suisse analysts, including Robert Springarn, are taking a longer-term approach with their investment thesis, and "remain enthusiastic about the overall macro- and micro-story for Boeing" after touring the company's 737, 767, 777X and 787 production lines.
"Other than the potential for some quarterly fine-tuning, our forecast remains intact and we reiterate our Outperform rating and $455 [target price]," the Credit Suisse analysts wrote in a research note.
There are 20 Buy ratings and 9 Hold ratings on the stock, according to Bloomberg data.
Boeing stock has gained about 19% year-to-date, handily surpassing the S&P 500's 7.5% climb.
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