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Boeing’s Outlook Improves: Analyst Upgrades Fuel Optimism
Boeing’s stock is poised for significant growth, according to financial analyst Jim Cramer, who emphasized the company’s recent advancements in a recent report. Cramer’s forecasts align with Bernstein’s latest assessment, which upgraded Boeing to an “outperform,” increasing the stock’s target price from $181 to $218 per share.
The analyst team highlighted that Boeing is making substantial progress on its growth trajectory, which they had anticipated prior to the Alaska door plug incident in January 2024. They observe that Boeing’s commercial aircraft division is on a more favorable path than it was in 2023, although they caution that not all risks have been mitigated.
Production Estimates and Challenges
Bernstein analysts reaffirmed their expectations regarding the 737 Max production rate, consistent with statements made by Boeing management during their first-quarter earnings call. However, they also noted the impact of tariffs, estimating that these would impose a financial burden of approximately $400 million on the company, although they anticipate a decline in these costs over time. The broader market context remains uncertain.
Overcoming Past Issues
This upgrade represents a significant win for Boeing, especially given the challenges it has faced in recent years. The company has dealt with increased scrutiny over manufacturing quality, which has adversely affected its stock value. A notable incident involved Alaska Airlines, which grounded its fleet of 65 Boeing 737 Max 9 planes after a mid-flight door malfunction. In response, the Federal Aviation Administration (FAA) mandated a production cap of 38 planes per month for Boeing.
During last week’s earnings call, Boeing CEO Kelly Ortberg announced the company’s ambition to increase this production rate to 42 planes per month, contingent upon FAA approval. Bernstein expressed caution regarding Boeing’s aim for further increases in production rates. They highlighted the company’s lack of experience with rapid production increases.
External Trade Factors
Despite recent positive developments, Boeing continues to confront challenges stemming from trade tensions with China. The recent halting of aircraft imports from Boeing by China, amid escalating tariffs introduced during President Trump’s administration, adds to the complexity. Nonetheless, Ortberg indicated to CNBC that aircraft destined for China could be redirected to alternative clients, mitigating the immediate impact on production recovery.
Additionally, earlier this month, Boeing reached settlements with the families of victims from the 2019 Ethiopian Airlines crash involving a 737 Max, just before a high-profile trial was set to begin. This tragedy led to a prolonged 20-month grounding of the aircraft model and incurred over $20 billion in costs for Boeing.
Future Prospects
The investment community is cautiously optimistic as Boeing has recently been added to the Bullpen, with considerations that its aircraft could potentially serve as leverage to alleviate trade deficits in a bid to avoid tariffs. Jim Cramer noted during Monday’s Morning Meeting that the stock’s anticipated growth reflects an improved outlook and a more stable production timeline following a substantial equity raise of $24 billion last November.
As of Monday, Boeing’s shares saw an increase of approximately 2.5%, trading in the low $180s range. The company appears to be on a recovery path, driven by a combination of strengthening production capabilities and a healthier balance sheet.
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