Investing.com – Boeing slid on Monday on worries that the ongoing 737 MAX crisis will likely continue to burn a hole in the aircraft maker's coffers leaving its credit rating vulnerable to a cut.
Analysts at Standard & Poor's warned that it may cut its credit rating for Boeing (NYSE:BA) as the ongoing crisis with its 737 MAX fleet, which has remained grounded for months following two fatal crashes, could cause the company's financial position to deteriorate in the months ahead, causing its ratio of cash flow to debt to reach a level that usually triggers a downgrade.
Boeing (NYSE:BA) slipped 1.2% to $340.87 at 1:52 pm ET (17:52 GMT). The decline subtracted nearly 28 points from the Dow. The 737 MAX woes have cut Boeing's stock return this year from 38% before the grounding to less than 6%.
The update comes after the company earlier in the day detailed plans to raise funds through a six-part bond offering later this year, with rival credit rating agency Fitch Ratings also flagging concerns about the Boeing's rising debt owing to the ongoing 737 crisis.
Boeing's debt could rise above $24 billion before the end of the year "as a result of working capital build up related to the 737 MAX grounding, but this will begin to decline once deliveries resume," Fitch Ratings said
The bond offering is expected to put any possible stock buybacks on the back burner, analysts said.
The negative day for Boeing comes a week after the company recorded its biggest quarterly loss and said it expects its 737 MAX jets to return to service by early in the fourth quarter. But the company warned it could further cut or suspend production of its bestselling planes on further delays.
Ryanair Holdings (NASDAQ:RYAAY), the Irish budget airline, said it has cut its growth targets in half for next year, scrapped 30,000 planned flights and could close bases and cut jobs if the return of the 737 MAX is delayed into next year.
Looking to the second half of the year, analysts at Stifel have signaled out order activity as the key factor to watch as traffic growth has slowed this year.
"We believe there is still significant risk associated with the MAX (return to service) RTS and headline risk as Boeing navigates the re-certification process," Stifel said in a note last week.
"(S)entiment on the health of the commercial cycle has been weakening as traffic growth has slowed in 2019, and order activity has been muted. We believe order activity will be the most important factor for broader sector sentiment in H2/19," it added.