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Credit Suisse On Boeing: Is Something 'Afoot' In Seattle?

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Boeing Co (NYSE: BA) is changing the rules of engagement with certain suppliers, both via aftermarket sharing and the addition of new suppliers. Credit Suisse’s Robert Spingarn maintained a Neutral rating, with a price target of $144, saying that the company seems to be “moving more aggressively in an attempt to capture margins.”

“In what some are dubbing Partnering for Success 2.0, a desire for higher margins and aggressive pricing on aircraft seems to be motivating Boeing to change the rules of engagement with some suppliers via required aftermarket sharing and the addition of new suppliers into the mix,” analyst Robert Spingarn wrote.

Contract With Aircraft Seat Maker

Boeing has entered into an agreement for LIFT to be the sole direct supplier for its current 737NG and successor 737 MAX. Currently, Boeing has 11 approved economy seat suppliers that would continue to sell directly to the airlines. This would allow optimization of production, since certain seat suppliers missing deadlines have caused delays in aircraft deliveries in the past, Spingarn noted.

Positive IATA Reports

According to IATA February figures, air passenger demand rose strongly, with RPKs up 8.6 percent y/y, “making this the best start to the year since 2008 (+7.8% YTD).” Although air freight volumes declined 5.6 percent y/y in February, comps were distorted by “a one-off boost a year ago as well as the timing of the Chinese New Year,” the analyst commented.

Boeing Wins Deal

Boeing has won a deal worth ~$923M for modification to the Army's 117 AH- 64E remanufactured helicopters. The date is estimated to be completed by May 31, 2018.

Latest Ratings for BA

DateFirmActionFromTo
Oct 2020Credit SuisseMaintainsNeutral
Sep 2020Alembic GlobalUpgradesNeutralOverweight
Sep 2020Morgan StanleyInitiates Coverage OnUnderweight

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