Categories Earnings, Industrials, Trending Stocks
Boeing lays down new safety policy as 737 Max crisis stays
Though Boeing’s (NYSE: BA) stock is recovering from the selloff that followed its dismal second-quarter results in August, the pace of recovery is sluggish. In a sign that the 737 Max crisis is taking a toll on its finances, the company reported a net loss for the quarter, after staying in the positive territory consistently in the recent past.
Boeing has been sending positive signals to the stakeholders with regard to the efforts being made to resume operations of the grounded 737 Max fleet. However, the fact is that the process needs to pass multiple regulatory scrutinies, which is time-consuming.
Modest Recovery
Fueled by the revival hopes and the management’s hectic efforts to regain the lost reputation, the stock is on the recovery mode but far below the $420-price target set by analysts. The 9% premium justifies the buy rating.
The management this week announced key decisions on enhancing safety. Accordingly, all safety-related matters will be overseen by a permanent panel to be deployed by the board of directors. The decision follows a high-profile safety review conducted by the company in the wake of the recent crashes.
‘Safety First’
A total of 346 passengers were killed in the two crashes that occurred within a gap of six months, raising serious questions about the aircraft maker’s credibility. As part of plugging the loopholes, the board will make sure that all new directors have extensive knowledge about aerospace safety.
Interestingly, the announcement coincides with the finalization of the new software for the grounded planes, which is expected to take them one step closer to resuming service. Meanwhile, the company is reported to have started settlements in a major lawsuit pertaining to the Lion Air crash.
Damage-Control
While these measures might help Boeing allay the market’s concerns to some extent, the company’s troubles are far from over as it faces multiple lawsuits for allegedly operating flights with doubtful airworthiness. Going forward, the extensive legal process will likely eat into Boeing’s resources, hindering future growth.
Also read: Boeing Q2 2019 Earnings Conference Call Transcript
After withdrawing from the peak in February, Boeing’s shares lost 12% so far. The stock, which has gained 19% since the beginning of the year, closed the last trading session above its long-term average.
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