Key Takeaways:
- Boeing may sell $10B in stock.
- Workers reject 25% wage hike.
- Has $58B in debt, concerns about credit rating.
- Stock down 42% this year.
Boeing’s Potential Stock Sale
Boeing is considering a $10 billion stock sale to address financial challenges caused by a machinists’ strike that began on September 13, 2024. The strike, involving 33,000 workers from the International Association of Machinists and Aerospace Workers (IAM), has halted production of key aircraft like the 737 MAX, 767, 777/777X, P-8, KC-46A Tanker, and E-7 Wedgetail.
Financial Struggles & Recovery Strategy
The strike began after workers rejected a 25% wage increase, demanding 40% over three years. Boeing’s revised offer of a 30% increase over four years was also rejected, leading to production slowdowns. Combined with ongoing quality control issues, Boeing has now burned through $8.25 billion in cash and has $58 billion in debt, raising concerns about its credit rating.
To address these financial pressures, Boeing is considering a $10 billion stock sale, backed by an order backlog of 5,490 aircraft and $8.46 billion in defense contracts. The stock sale and defense contracts are both vital to Boeing’s financial recovery.
The company also plans to buy back Spirit AeroSystems for $4.7 billion, but reintegrating this key supplier will require further investment.
Market Impact and Analyst Estimates
Boeing’s stock has fallen 42% this year, its worst drop since the 2008 financial crisis, and analysts are reacting. Wells Fargo downgraded its price target to $119 with a sell rating, while TD Cowen, Goldman Sachs, and Jefferies, despite maintaining buy ratings, have reduced their price targets to $200, $202, and $240 respectively.
Market Update Into September 7th: Inflation Data Incoming