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Market Analysis
Boeing Stock Plummets 39% YTD as Strike Enters Third Week
Boeing faces deepening crisis as ongoing strike, regulatory issues, and financial struggles send shockwaves through its supply chain and drive its stock to new lows.
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Boeing Co. (NYSE: BA) and its extensive network of suppliers are grappling with the fallout from a widespread machinists’ strike that has brought production to a standstill at several of the aerospace giant’s key facilities.
The labor strike, which began on September 13, 2024, has halted the manufacturing of popular aircraft models and is sending ripples through the aviation industry’s supply chain, raising concerns about long-term workforce retention and financial stability.
Boeing Strike Impacts Suppliers
The strike, involving 30,000 machinists and marking Boeing’s first in 16 years, has ceased production of the 737 MAX, 767, and 777 aircraft.
This sudden halt has left suppliers like Pathfinder Manufacturing and New Tech Industries in a precarious position. Pathfinder, which operates a training program for new aerospace recruits, has already furloughed 14 of its 54 employees. Meanwhile, New Tech Industries, a specialized tooling manufacturer heavily dependent on Boeing for 85% of its business, has postponed plans to upgrade its machinery.
Suppliers are voicing concerns over retaining skilled workers during the production stoppage, managing cash flow with paused orders, and uncertainty about future production schedules.
Some are taking proactive measures, such as Pathfinder’s decision to continue covering health care benefits for furloughed workers in hopes of retaining them when operations resume. In a bid to diversify their client base, some suppliers are even preparing pitches to Airbus, although this is not seen as an immediate solution to their current challenges.
Boeing Faces Multiple Challenges Other than Labor Strike
Beyond the strike, Boeing is confronting a series of additional hurdles that are weighing heavily on its performance and stock price.
The company’s shares recently hit a 52-week low of $151.65, reflecting a 19.13% decline over the past year. This downturn comes amid ongoing production issues and heightened regulatory scrutiny.
The National Transportation Safety Board has recommended immediate safety checks on the 737’s rudder control system following an incident with a United Airlines Boeing 737 MAX 8. This development adds to Boeing’s regulatory woes, which include a proposed plea deal under review related to criminal fraud conspiracy charges stemming from the 737 MAX crashes.
Furthermore, the company’s credit rating is approaching junk status, and its defense division is reporting losses, compounding the financial pressures facing the aerospace manufacturer.
BA Stock Price Reflects Ongoing Turmoil
As of 9:48 AM EDT (at the time of writing) on September 30, 2024, Boeing’s stock was trading at $152.80, down $3.52 or 2.25% from the previous close.
The stock’s performance continues to lag behind the broader market, with year-to-date returns of -41.39% compared to the S&P 500’s gain of 20.21%. Boeing’s market capitalization stands at $94.145 billion, with an average trading volume of 5,945,116 shares.
The company’s financial metrics further underscore its challenges, including a negative EPS of -$5.64 and a profit margin of -4.68%.
Disclaimer: The author does not hold or have a position in any securities discussed in the article.
Tim Fries
Tim Fries is the cofounder of The Tokenist. He has a B. Sc. in Mechanical Engineering from the University of Michigan, and an MBA from the University of Chicago Booth School of Business. Tim served as a Senior Associate on the investment team at RW Baird's US Private Equity division, and is also the co-founder of Protective Technologies Capital, an investment firm specializing in sensing, protection and control solutions.
