On Tuesday, Jefferies maintained a Buy rating and a $300.00 price target on Boeing (NYSE:BA), despite reports of regulatory scrutiny and delivery setbacks. Boeing has reportedly failed a significant number of Federal Aviation Administration (FAA) audits at its facilities, with 33 failures out of 89 checks and 97 instances of non-conformance. Spirit AeroSystems (NYSE:NYSE:SPR), a key supplier for Boeing, also failed a majority of its audits.
In related news, Southwest Airlines (NYSE:NYSE:LUV) has substantially reduced its Boeing 737 MAX aircraft delivery expectations for the year 2024. Initially expecting 79 MAX aircraft, including both -7s and -8s models, the airline has now adjusted the forecast to 46 aircraft, exclusively -8 variants. This revision comes amid ongoing certification delays, particularly affecting the -7 model.
As a result of the reduced delivery numbers, Southwest anticipates a decrease in available seat miles (ASMs) by 1 percentage point from the previously guided 6% year-over-year growth. The airline is set to re-optimize its schedules, primarily in the second half of 2024, to accommodate the changes. Southwest plans to re-evaluate its entire 2024 guidance and will provide updates during the first quarter earnings call scheduled for April.
Alaska Airlines (NYSE:ALK) has received partial compensation from Boeing for the grounding of the MAX 9 aircraft in the first quarter. However, the airline faces ongoing uncertainty regarding future capacity due to the delivery delays.
The revised delivery expectations and the FAA audit outcomes have brought Boeing and its commercial airline customers under the spotlight, as they navigate the regulatory and operational challenges ahead. Boeing's stock continues to be watched closely by investors as the company works through these issues.
InvestingPro Insights
Boeing (NYSE:BA) faces a turbulent period, as highlighted by recent regulatory challenges and delivery delays. In light of these events, InvestingPro data and tips offer a deeper look into the company's financial health and market position. With a market capitalization of $113.02 billion and a troubling P/E ratio of -50.32, Boeing's financial metrics suggest a company facing significant headwinds. The negative P/E ratio indicates that the company has not been profitable over the last twelve months as of Q4 2023.
Despite these challenges, net income is expected to grow this year, according to an InvestingPro Tip. This could signal a potential turnaround for the aerospace giant, which is also a prominent player in the Aerospace & Defense industry. However, investors should note that the company's stock price has been quite volatile and is trading near its 52-week low, reflecting the market's reaction to the recent setbacks.
Boeing's gross profit margin stands at 11.89%, which is considered weak, especially when compared to industry standards. This aligns with another InvestingPro Tip indicating the company suffers from weak gross profit margins. Additionally, Boeing's EBITDA saw a significant growth of 171.43% over the last twelve months as of Q4 2023, yet it is trading at a high EBITDA valuation multiple, which could be a point of concern for value-focused investors.
For investors seeking further insights, there are 7 additional InvestingPro Tips available, including analysts' earnings revisions and valuation multiples. To explore these insights, visit https://www.investing.com/pro/BA and don't forget to use the coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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