We know that aerospace stock Boeing (BA) has been pursuing quality of late with a downright aggressive quality. In fact, Boeing’s pursuit of product quality is taking on downright martial metaphors to establish itself, leading to what is known as a “war on defects.” The result is a lot more vigilance, but is this sustainable? Regardless of the answer, Boeing shareholders are pleased. They sent Boeing shares up nearly 2% in Tuesday afternoon’s trading.
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Boeing’s safety inspections now feature multiple steps and multiple workers. Reports note that, right from the beginning of the process—when a future 737 MAX is little more than a big tube—inspections begin on the tube immediately. And this is just the start. Further steps in the process feature equipment arrival inspections, a better adherence to standard production order, and—in a bid to speed up at least part of the process—simplified paperwork.
This might sound like little more than a shrug, but the impact is being felt. Customers say that Boeing planes are arriving in much better condition than their equivalents from a year or two ago. Further, the Federal Aviation Administration (FAA) has dialed back its production cap on Boeing’s operations, with some signs suggesting more may be coming.
Prebuilding Demand
Yet in an odd twist, it turns out that Boeing has already built some 777X aircraft. Reports suggest a whopping 26 of these aircraft already exist. Why is that a problem? Because the aircraft have yet to be certified by the FAA. So why even build these aircraft to begin with? Why spend resources putting together technically unsellable aircraft?
The good news is there are some reasons. Four of the 26 are going to be involved in “active test campaigns.” This is actually a smart idea; having four different aircraft running at once allows for more expedient testing. The remaining aircraft are going into storage, a move that will help Boeing achieve “rapid delivery” once the aircraft actually is certified. And since the planes have to be production models to be tested, producing some of them becomes vital.
Is Boeing a Good Stock to Buy Right Now?
Turning to Wall Street, analysts have a Strong Buy consensus rating on BA stock based on 13 Buys, two Holds and one Sell assigned in the past three months, as indicated by the graphic below. After an 18.81% rally in its share price over the past year, the average BA price target of $249.07 per share implies 36.26% upside potential.
