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Buckingham Reiterates Boeing At Underperform, Saw Price Drop Coming

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Buckingham Reiterates Boeing At Underperform, Saw Price Drop Coming

Buckingham Research Group in a note out Thursday said Boeing Co (NYSE: BA) was likely to fall on the day, thanks in part to various press reporting employee cuts and pricing pressure.

One-year trading currently comes in down almost 29 percent for Boeing and the 52-week range between $104.53–158.83.

Buckingham opened, "The press reported yesterday [Wednesday, February 10] that BA held a webcast where Boeing Commercial Aircraft (BCA) President and CEO Ray Conner addressed BA employees. BA also told us that Conner spoke at BA's annual leadership meeting.

"Press reports claim the following statements were made by Conner during the webcast: 1) that BA could make a decision to launch a new airplane this year; 2) that there would be significant job cuts to [sic] in order to reduce costs, and; 3) that BA is having to significantly reduce prices in order to compete with Airbus," the report elaborated.

Related Link: Boeing Shares Sell Off Following Reports CO Facing SEC Probe Over Accounting

Quick to point out that Boeing has yet to release any official comment regarding the alleged statements, Buckingham cautiously reiterated its Underperform rating on Boeing, "Assuming the press reports are correct, we think that this news comes at a bad time for BA and we think the stock could trade down today."

Supporting the anticipated drop for Thursday, Buckingham explained, "We think investors will focus on the potential impact of pricing on BCA margins and what the cost to develop a new airplane might do to consensus forward cash flow estimates."

However, Buckingham did emphasize that the possible job cuts tidbit does come in line with initiatives for productivity, "BA also noted that some of these cuts are associated with 747 production rate cuts. We agree with BA here, job cuts alone are not necessarily indicative of anything ominous."

Reiterating that jobs numbers, when taken out of context, cannot be a true representation of company performance (present or future), Buckingham commented, "BA has consistently stated that the business environment is highly competitive."

"[T]here appears to be a disconnect between what the press is reporting Conner said about pricing and what management said during the 4Q15 earnings call. During the 4Q15 call, management noted that there is no issue with competitive pricing. However, it's being reported that during the webcast Conner is noting fierce competitive pressure and that BA is having to cut prices to compete with Airbus. Those competitive pressures, according to Conner, are driving the job cuts."

At the time of publication, Boeing had just extended its 52-week range by hitting a 52-week low at $102.58.

Latest Ratings for BA

DateFirmActionFromTo
Jan 2021BerenbergUpgradesSellHold
Jan 2021BernsteinDowngradesMarket PerformUnderperform
Dec 2020RedburnDowngradesNeutralSell

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