23 June, 2009

The Grounded Plane: Boeing delays 787 Dreamliner

Technical complications, worker strikes, and everything in between has at one point or another hampered Boeing's (BA) ability to deliver its much-delayed 787 Dreamliner aircraft. The stock took an almost 7% dive today, adding to a 40% drop in the last year and a 50% drop since October of 2007. That being the announcement of the first 787 delay for the aircraft company.

Investor patience is being tested to the limits with Boeing as it is in a sharp fight with rival Airbus for future contracts in an industry marred with carriers in serious financial trouble, given the latest economic fallout and fluctuations in energy prices. Boeing has historically seen several missteps as it works on its revolutionary, next generation plane and what had been seen as a sales boom for the company is now once again stalled at the factory.

The aircraft is a first for many reasons, from its 250-seat advanced interior to its exterior made entirely of composite materials, an industry first. Boeing was confident in its ability to deliver the aircraft in the first half of next year to its customers, however delaying the first flight indefinitely due to newly-found exterior stresses, will likely push dates back by months. This news did not please investors in today's trading session, sending shares lower by $3.

What's in store for Boeing stock? The March lows of around $30 will still be the complete floor of support, unless the general economic footprint fails further, so any pullback into the low $40s is attractive for this large-cap with a nearly 4% dividend yield. Remember, this stock was in the $80s a year ago, despite having already delayed the 787 several other times. So when that first flight and initial delivery take place next year, those are catalysts that provide the company with two major milestones to appease investors. Aircraft have been in the news recently for the most tragic of events, as the investigation into the Air France Airbus crash continues, but precisely when the mood is most distraught around an industry, is when some attractive valuations can be found. Is it Boeing's time in the mid $40s? Yes, but buy in parts, and if the stock retreats to $40 it'll itself be a Dreamliner in the year(s) to come.

Disclosure: Author holds no position in BA

1 comment:

Techsense said...

hiii do you want to exchange link with my blog techsense http://itstechsense.blogspot.com/
if interested then leave me a comment