Bad news for aerospace stock Boeing (BA), as one of its military customers may be considering other options. Reports note that the North Atlantic Treaty Organization (NATO) may be considering Swedish or even Canadian options to replace the E-3A Sentry line. This news did not sit well with investors, and Boeing shares slid fractionally in Friday’s trading.
Claim 55% Off TipRanks
- Unlock hedge fund-level data and powerful investing tools for smarter, sharper decisions
- Discover top-performing stock ideas and upgrade to a portfolio of market leaders with Smart Investor Picks
Boeing’s E-3A Sentry was an airborne warning and control system (AWACS) aircraft, and served as a major chunk of NATO’s operations for decades. But with the possibility that the United States may depart NATO, NATO itself is looking to distance itself from Boeing. As such, NATO is looking at Saab (SAABF) from Sweden, and Bombardier (BDRBF) from Canada to take over with the GlobalEye platform.
If this actually comes to pass, it will be the first time since 1982 that a Boeing aircraft did not stand as the “common surveillance backbone” for NATO, reports noted. There were some unexpected hiccups in recent deals with NATO that raised eyebrows, though. For example, Boeing’s contract for the E-7A Wedgetail came without competitive tender. Saab’s CEO declared the process was “rushed,” and that NATO had made up its mind without even considering GlobalEye.
Modifications Needed
While Boeing struggles to get the 777-9 certified, Boeing also expects a certain amount of work will have to be done on some of the earliest 777X aircraft before they can be delivered. Initial deliveries are still expected for next year, reports note, but a certain amount of change will have to take place regardless, a natural consequence of the certification process.
Boeing CEO Kelly Ortberg noted that those changes were required, as Boeing had to build several aircraft early to “get all the learning.” So now, in order to bring the early models in line with what will be approved, Boeing will have to modify the early models to make them match up. Only about 30 aircraft will be subject to these changes, however. The rest will be made to spec accordingly.
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 15 Buys and one Hold assigned in the past three months, as indicated by the graphic below. After a 31.58% rally in its share price over the past year, the average BA price target of $273.77 per share implies 17.66% upside potential.
