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Boeing Has Lost $27 Billion in Market Value since Ethiopian Crash


Apr. 24 2019, Published 9:06 a.m. ET

Boeing stock plunged

Before the Ethiopian Airlines crash on March 10, Boeing (BA) stock had been rallying since the beginning of this year due to growing optimism about the company’s revenue and cash flow growth.

Several quarters of robust revenue and earnings growth trends boosted investors’ confidence in the stock.

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The airplane manufacturer has reported better-than-expected earnings results for the last 11 quarters. Boeing’s quarterly EPS have grown in the double-digit range in the previous nine quarters.

The company’s massive order backlog along with the announcement of increasing production and prices for its fast-selling 737 MAX series jets made analysts and investors optimistic about its future performance. On March 8, Boeing stock’s YTD (year-to-date) return was 31%.

However, since the Ethiopian Airlines crash, the stock has seen a massive sell-off. Since March 10, the airplane manufacturer (XLI) has lost 11.5%, ~$27 billion of its market value. The sell-off has eroded the air defense contractor’s YTD gain to ~16%.

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737 MAX crisis

Since the Ethiopian crash, Boeing’s 737 MAX planes have been in troubled waters, as this was the second time the same series of jet was involved in a deadly accident. Following the crash, air carriers (IYT) around the world grounded their fleets of 737 MAX aircraft, and they’ve denied taking further deliveries until the safety concerns are cleared.

The 737 series of jets accounts for ~80% of Boeing’s total aircraft orders and contributes one-third of the company’s overall operating profit. Delays or delivery cancellations could hurt the airplane manufacturer’s revenues and cash flows. Currently, Boeing has over 4,600 backlog orders worth over $400 billion for its 737 Max series aircraft.

Until March 8, Boeing was the highest gainer among the Dow 30 stocks. However, since the Ethiopian Airlines crash, it has slipped to the 15th position. Apple (AAPL) and United Technologies (UTX), which have risen 31.5% YTD each, are the top performers among the Dow 30 stocks. Cisco (CSCO) and Intel (INTC) are in the second- and third-place spots with YTD returns of 30.8% and 25.3%, respectively, for the same period.


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