The Boeing Company (NYSE: BA) shares are trading nearly flat on Tuesday. According to analysts from Moody's and S&P, Boeing is reportedly expected to miss a crucial 737 MAX production target for 2024.
Moody's and S&P warn that Boeing might not meet its goal of 38 MAX jets per month until 2025 due to risks such as potential labor disruptions. However, the companies do not foresee an immediate credit downgrade to junk levels, reported Reuters.
The report cited Jonathan Root, Moody's lead analyst on Boeing, who predicts the company will produce 32 MAX jets per month by the end of 2024 and hit the 38-jet target in the second half of 2025.
Ben Tsocanos, aerospace director at S&P Global Ratings, said, "We see risks to reaching that number (38), including labor negotiations and the company's history of underdelivering relative to targets."
"We view increasing and stabilizing MAX production as necessary to generating free cash flow, which is ultimately what we care about to maintain the rating."
Reuters noted that Boeing responded to a comment request by citing its finance chief's statement that production should reach 38 planes per month by the end of 2024.
As per the report, new CEO Kelly Ortberg has not yet commented on production plans, but analysts at William Blair suggest he might lower the target to focus on quality.
BofA Securities analyst Ronald J. Epstein maintained a Neutral rating on Boeing, citing that Aero Analysis Partners/AIR reports Boeing has delivered 4-6 737s, consistent with last month's numbers, as of August 8.
Inventory levels decreased to 183 undelivered 737s from 187 the previous week. Additionally, deliveries this month included 2 787s and 1-3 767s, adds the analyst.
Last week, Ray Goforth of the Society of Professional Engineering Employees in Aerospace reported a slowdown at Boeing's Renton 737 facility due to issues with junction boxes. Boeing confirmed that 3 delivered airplanes had non-conforming components and are now grounded, writes the analyst.
Epstein says that the company must rework these aircraft to meet requirements, potentially delaying future deliveries.
Investors can gain exposure to the stock via Gabelli Commercial Aerospace And Defense ETF (NASDAQ: GCAD) and iShares U.S. Aerospace & Defense ETF (NYSE: ITA).
Price Action: BA shares are down 0.58% at $163.18 at the last check Tuesday.