Boeing shares fall as 737 goal at risk from supplier defect involving Spirit
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2023-08-24 19:16
By Abhijith Ganapavaram (Reuters) -Boeing shares fell 2% before the bell on Thursday after the U.S. planemaker warned of delays

By Abhijith Ganapavaram

(Reuters) -Boeing shares fell 2% before the bell on Thursday after the U.S. planemaker warned of delays in near-term deliveries of 737 MAX jets due to a fresh quality issue involving its biggest supplier Spirit AeroSystems.

This could put pressure on the top end of Boeing's annual 737 delivery target of 450 planes, some Wall Street analysts warned even as the planemaker said it was evaluating that goal.

It is for the second year that Boeing's delivery targets are under review, after supply-chain issues forced it to temper its goal last year. The latest quality issue is due to improperly shaped holes in the aft pressure bulkhead of some planes.

The bulkhead is a structure that seals off the rear of the pressurized cabin. The parts in question were made by Spirit, whose shares were down 6.4% in premarket trading on Thursday.

But not all 737 fuselages will be impacted as Spirit uses multiple suppliers for the aft pressure bulkhead.

Boeing believes the defect is limited to a portion of its bestselling MAX 8 model, but was evaluating if older-model 737 Next Generation jets have also been impacted.

"It is early days on both the near and long-term financial impacts of the issue, but it appears the fix is likely to take several weeks for completed aircraft," Citi analyst Jason Gursky said in a note.

The planemaker's ratio of enterprise value to sales for the next 12 months is 2, compared to 1.3 for rival Airbus, as per Refinitiv data. A low ratio implies a more attractive investment opportunity.

The defect also adds more pressure on Spirit after it took a financial hit from a another quality issue and reported bleak results due to a worker strike earlier this year.

Boeing's shares were trading at $224.03 compared with Wall Street's median price target of $254.70. It was $238.50 three months ago.

(Reporting by Abhijith Ganapavaram in Bengaluru; Editing by Arun Koyyur)

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