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Analysts Cut Boeing’s 737 MAX Delivery Forecast


May. 8 2019, Published 8:07 a.m. ET

Delivery forecast

Boeing’s (BA) best-selling 737 MAX series planes are facing worldwide grounding after two 737 MAX jets crashed in less than five months. Airline operators around the world have denied taking deliveries of the planes until safety concerns get cleared.

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Therefore, several brokerage firms have lowered their 737 MAX delivery forecast for the year. In April, Cowen and Company cut its delivery projections for the model to 500 aircraft from 630 jets anticipated previously. Jefferies, another research firm, is also now expecting Boeing’s shipment for 737 MAX aircraft to be around 497 units, which is over 14% down from 580 units it projected earlier.

Since the Ethiopian Airlines crash on March 10, deliveries for 737 MAX series planes have been frozen. Therefore, Boeing in early April announced it would lower its monthly output of the said series planes by 19% to 42 units from 52 units. The output cut means that Boeing is likely to miss its 2019 shipment targets of delivering 895–905 planes. In 2018, the airplane manufacturer delivered a record 806 aircraft, 580 of which were 737 Max series jets.

Boeing’s 737 series planes account for approximately 80% of its total aircraft orders and contribute one-third to the overall operating profit. Delays or delivery cancellations could hurt the airplane manufacturer’s revenues and cash flows. Currently, the company has nearly 4,600 backlog orders for the series valued at over $500 billion.

YTD stock performance

Yesterday, Boeing stock hit a low since the Ethiopia crash of $355.02. Before the crash, the airplane manufacturer was the highest gainer among the Dow 30 stocks with a rise of 31%. However, it has now slipped to the 17th position with a YTD return of 10.8%.

With a YTD gain of 28.6%, Apple (AAPL) is the top performer among the Dow 30 stocks. United Technologies (UTX) and American Express (AXP) are in the second and third spots with YTD returns of 27.2% and 24%, respectively, for the same period. Boeing has also underperformed the returns of the Industrial Select Sector SPDR Fund (XLI), which tracks the industrial sector stocks from the S&P 500. The ETF has gained 18.1% YTD.


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