Boeing 737 Max

Boeing 737 Max Could Get FAA OK Soon But fourth quarter Earnings will be a disaster

According to a report by analysts last week, the aerospace giant “Boeing 737 Max” fourth-quarter earnings will be a complete failure due to continuity in crises. Therefore, Boeing (BA) stock rose.

Reuters reported that Steve Dickson, FAA chief had told US Airlines executives on Friday that Boeing 737 max could continue the service till mid of the year after regulatory approval.

In a statement to Reuters, FAA confirmed that Dickson repeated the agency “has set no time frame for completion of certification work on the aircraft” while adding it is “pleased with Boeing’s progress in recent weeks toward achieving key milestones.”

Last week, United Airlines (UAL) clarified that it doesn’t expect its Boeing 737 Max flights to fly for the summer travel season. On the other hand, American Airlines (AAL) and Southwest (LUV) have removed the trip from their scheduled planes from June.

According to analysts, the Boeing 737 Max income has dropped from 68.4% to $1.73 per share, with revenue falling from 23.5% to $21.67 billion. Thus the reports presented early Wednesday don’t indicate any specific timeline for this aircraft returning to usual service. That is a big concern.

Vertical Research analyst Robert Stallard and Karl Oehlschlaeger noted that 4Q19 earnings for Boeing 737 Max will be an “absolute disaster. They now look this guaranteed.

Boeing has stopped the troubled jet production to overcome overflowing expenses but also plans to resume it before FAA approval on the jet.

Stock market analysis for today says that Boeing stock revered higher rising upto 1.7%. Top Boeing 737 Max supplier Spirit AeroSystems (SPR) stock jumped to 4% while there is a dip of 0.5% for General Electric (GE). According to MarkSmith chart analysis, shares are still stuck to below per day moving averages

Boeing 737 Max prices to rising 

So far, Boeing 737 Max has booked $9.2 Billion in charges for the grounding and has halted jet production. It also includes compensation costing for airline customers and additional production costs, which is $5.6 billion and $3.6 billion, respectively.

According to the estimation by Jefferies analyst, Sheila Kahyaoglu Boeing 737 max may require an additional $10 billion for airline compensation package along with $5.4 billion to its cost estimation for production. This extra cost of $15.4 billion is going to put Boeing’s total cost estimation at a fantastic value of $24.6 billion.

Moreover, Boeing is also facing pending lawsuits from victim families and investigation from various agencies, while airlines are demanding compensation over the lost revenue from the grounding process.

Calhoun First Earnings Call

The earnings call scheduled on Wednesday will be the first meeting for new CEO David Calhoun after old CEO Dennis Muilenburg, fired in December due to ongoing crises.

After taking responsibility, David Calhoun promised greater transparency, but that won’t be enough, according to analysts.

Now the question arises that what is the major issue behind all this? A toxic corporate culture and “Overarching all this is the issue of ‘Hubris can be the key reason behind the happening. The vertical analyst wrote that the new CEO might rectify other issue but changing the company culture is a long term process and is a difficult thing to handle.

The new CEO again assured the investors that the company wouldn’t suspend the dividend. But the statement seems to be suspicious due to 737 Max costs expected to soar. Believing in reports, Boeing is looking to secure the loan for $10 billion.