Boeing Stock Dips: Layoffs, Strike & Delays Rattle Investors
Published On: October 15th, 2024
Boeing’s stock has taken a hit following recent announcements of substantial layoffs and delays in new aircraft launches. With a strike at their Washington state factories continuing into its fifth week, Boeing is facing escalating costs and operational challenges. The company disclosed they will cut around 17,000 jobs, or about 10% of their workforce, in response to mounting losses and ongoing production delays, particularly with the 777X wide-body aircraft, now postponed until 2026.
- Stock price: Boeing (BA) shares fell over 1.3% to $149.17 on Monday, after-hours
- Job cuts: Boeing plans to reduce their workforce by 10%, affecting around 17,000 jobs
- Project delays: The 777X aircraft's launch has been postponed to 2026
- Financial impact: Boeing expects a $5 billion charge this quarter, with projected losses of $10 per share
The persistent machinists' strike, which began in mid-September, is significantly impacting Boeing's cash flow. Analysts estimate that the strike costs Boeing over $1 billion each month, exacerbating the company’s financial strain as they navigate additional safety and regulatory hurdles following past incidents with the 737 MAX. In response to these challenges, Boeing has also announced plans to halt production of the 767 freighter in 2027, further signaling its need to streamline operations.
Industry reaction and comparisons
The stock drop and structural changes at Boeing reflect broader concerns within the aerospace industry. Comparatively, other aerospace giants, such as RTX (Raytheon) and Textron, are also managing through challenges but have not faced layoffs of this magnitude. Insiders suggest that Boeing’s aggressive workforce reductions could affect long-term production and quality, especially as competitors like Airbus continue to strengthen their positions. Acting US Labor Secretary Julie Su recently intervened, attempting to mediate between Boeing and the machinists' union to resolve the strike and mitigate further disruptions.
The company’s struggle to maintain an investment-grade credit rating has also raised alarms among industry experts and investors. Boeing's financial woes might lead to a downgrade by S&P Global, potentially affecting their ability to secure future investments. Insiders argue that Boeing’s moves may seem drastic but are necessary steps toward recovery, though the uncertainty surrounding labor negotiations and the company’s large debt burden leave their future unclear.
What this means for investors
Boeing’s stock volatility underscores the risks investors face as the company undertakes significant restructuring amid ongoing production and labor issues. While analysts like UBS have slightly reduced their price targets for Boeing, they maintain that restructuring could eventually lead to stabilization. However, the delays in key projects and potential downgrades may deter some institutional investors. For consumers, the ongoing disruptions could mean longer waits for new aircraft and a reshaped air travel industry landscape.
As Boeing navigates through these turbulent times, investors are advised to monitor developments closely, particularly the outcomes of labor negotiations and any potential changes to their credit rating. For now, Boeing remains a key player in the aerospace industry, albeit one facing significant headwinds.