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Is bottom in for Boeing stock as defense giant prepares for the leadership change

Published 03/26/2024, 02:46 PM
© Reuters

Boeing (NYSE:BA) has been grappling with a series of significant challenges over the past few months that have reverberated across the company and the broader aviation sector. As Boeing, which announced on Monday that CEO Dave Calhoun is stepping down, strives to navigate through a turbulent period, the implications of these challenges are having a significant effect on the company and Boeing stock. 

Boeing CEO to step down

The plane maker announced significant management changes on Monday, with Dave Calhoun to step down as CEO at the end of 2024. The company revealed that Calhoun will continue to lead Boeing through the year to "complete the critical work underway to stabilize and position the company for the future," said Boeing.

However, there was more, with Boeing adding that board Chair Larry Kellner has informed the company he does not intend to stand for re-election. Boeing’s board has elected Steve Mollenkopf to succeed Kellner as independent board chair.

Meanwhile, it was revealed that Stan Deal, Boeing’s Commercial Airplanes President and CEO, will retire from the company, with Stephanie Pope appointed to lead the unit, effective Monday.

Reputation damaged

The various challenges that Boeing has faced have significantly impacted the company, and recent reports state the company could face a criminal investigation into the January 5 mid-air emergency where a door plug on a Boeing 737 Max 9, blew out.

Meanwhile, reacting to the news of Boeing’s leadership reshuffle, CFRA Research analysts said in a note that despite the shake-up at the top, they “think BA has two major issues that will take time to resolve.” 

“The first is a culture issue. We believe that speed-to-market has been treated by management as a relatively higher priority than quality for some time, and we note that Calhoun became CEO following the last crisis in 2018-2019 over the 737 MAX MCAS software problems,” said the firm. 

They added: “The second issue is innovation. We note that the 737 MAX is an update of a 50-year-old plane family, and that chief rival Airbus (AIR FP) has held a market share advantage over BA in commercial aircraft deliveries since 2019.”

In the longer term, CFRA believes BA should still benefit from strong secular growth trends in new aircraft, although they acknowledge that the near-term prospects remain “very tenuous.”

Boeing's reputation has been significantly impacted by the series of challenges it has faced. Serious questions have been asked about manufacturing and quality control issues. The issues have not only raised doubts about safety and quality but have also instilled skepticism among passengers and airlines. 

As a result, Boeing’s reputation has been significantly impacted, posing substantial hurdles for the company to regain trust and restore its image in the aviation industry.

Boeing stock forecast: Analysts share their views

Bank of America: “The new CEO will be coming into a Boeing which has been playing a reactionary defense for quite some time, however the best leaders are forged in fire. This may be the first real chance, in a long time, Boeing has had to clean-house and reset their own narrative. While we view the changes as a positive, uncertainties remain, and we reiterate our Neutral rating.”

Barclays: “While this announcement along with recently cutting 2024 FCF expectations have helped the stock bounce a bit, improved MAX production is likely key to a further move higher.”

Wolfe Research: “We remain Outperform rated and think the changes will get more investors to kick the tires on shares given performance YTD (down ~25%), with opportunity for bigger follow-through opportunity depending on the new leader (and progression of operations in the interim).”

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