Boeing (BA) shares fell today, dropping 3.12% at the close, after the company reported a massive quarterly loss and said that the production schedule (moving the first flight date to early 2020 from earlier guidance for late 2019) for its newest plane, the 777x, could slip due to problems with the plane’s engines.
The big adjusted loss of $5.82 a share was expected. In fact Wall Street analysts had forecast even worse results with the consensus pointing to a loss of $6.69 a share. If the loss had been the only bad news today, the stock would probably have rallied in my opinion.
But the news of troubles with the GE engines on the new 777x was unexpected. Wall Street sees the plane, a bigger, more fuel efficient aircraft that will fly on two engines instead of the four common for current planes of this size, as Boeing’s next big winner. And an on-time launch of the 777x, with first delivery in late 2020, Boeing confirmed today, would help put the current troubles with the 737Max behind the company. Analysts think that first delivery in late 2020 after first flight in early 2020 is an extremely tight schedule for winning certification for a new aircraft, especially given the crashes of two Boeing 737Max aircraft.
More than Boeing’s share price is at stake here. In an industrial sector that has been showing weak results this earnings season, aerospace stock have been a pillar of strength with strong organic sales growth in the Honeywell International (HON) and United Technologies (UTX) units that sell engines and parts. But Boeing’s shrinking backlog threatens its suppliers too. The company’s huge backlog of 5,500 airplanes at the end of the second quarter is actually down from the backlog of 5,600 planes at the end of the first quarter. Much of that reduction in the backlog is  reaction to the continued grounding of the 737Max after two fatal crashes. Boeing is scrambling to fix a engineering problem with the sensor that feeds airspeed data to the plane’s autopilot. And to convince regulators, especially European Union regulators, to certify the plane to fly again as quickly as possible.
