FAA's Approval of Boeing's 787 Inspection Removes a 'Significant Overhang' on Stock

FAA's Approval of Boeing's 787 Inspection Removes a 'Significant Overhang' on Stock - Analyst

Stock Markets Aug 01, 2022 06:26AM ET

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FAA's Approval of Boeing's 787 Inspection Removes a 'Significant Overhang' on Stock - Analyst

By Senad Karaahmetovic

The U.S. Federal Aviation Administration (FAA) has approved Boeing’s (NYSE:BA) inspection plan to resume deliveries of the 787, Reuters reported on Friday.

This news comes after Boeing said it is “very close” to restarting 787 deliveries. Boeing didn’t confirm the Reuters story but said it “will continue to work transparently with the FAA and our customers towards resuming 787 deliveries.”

A Goldman Sachs analyst sees Boeing being able to restart 787 deliveries in “early August” following the report from Reuters.

“A 787 delivery resumption would clear a significant overhang on the stock, by unlocking substantial cash flow currently tied up in 787 unit inventory, providing visibility into higher future production rates, and diminishing investor concerns around capital structure,” the analyst said in a client note.

Given that Boeing has 120 787s in inventory, the analyst estimates these are worth almost $7 billion net of advances.

A Jefferies analyst expects the company to slowly restart deliveries.

“We est 12 deliveries in 2022 (3/mo. starting Sept) rising to 84 (7/mo.) in 2023. This assumes the 115 787s in inventory today declines to 49 by YE 2024 (vs mgmt by about end of 2023). The low rate and rework drive $2BB of abnormal costs ($1.1BB YTD, including $283MM in Q2) through 2023. Cash tied to 787 deliveries is negative in 2022, given these costs rising to +$24MM/aircraft in 2024,” the analyst wrote.

Boeing shares are up over 3% in premarket Monday.

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