“Not at This Time”: Boeing Stock (NYSE:BA) Slips as Production Cap Stands

Aerospace stock Boeing (BA) has been working on a comeback for most of the last year now, and has been, by all reports, doing quite a job of it. But one of the biggest sticking points came directly from the Federal Aviation Administration (FAA) itself: the production cap on 737 Max jets. And Boeing’s plans to push past that cap will be on hold for the foreseeable future as the FAA itself weighed in. The news did not sit well with shareholders, who sent shares down fractionally in Wednesday afternoon’s trading.

Word from the acting head of the FAA, Chris Rocheleau, dashed Boeing’s hopes of a short-term production cap hike as he declared at a House hearing: “Not at this time.” He was asked, of course, about raising the cap. Meanwhile, Rocheleau also noted that he would not discuss any change to the policy of inspecting every Boeing plane before giving it its airworthiness certificate, instead of delegating that task to Boeing itself.

The news from Rocheleau likely came as a surprise to Boeing, especially to CEO Kelly Ortberg, who laid out plans to increase production to reach the cap of 38 planes, and then, once that cap was achieved, push beyond that cap. But with Rocheleau’s remarks, getting approval to go beyond 38 might take more time than Boeing ever thought.

A Problem for Growth?

Having production stalled at 38 jets per month might be a problem for Boeing in the long term. After all, Boeing currently has a backlog of around 5,648 jets as of the end of March. Granted, not all of those are 737 Max jets, but given that that is kind of Boeing’s biggest seller right now, most of them are. And if we assume they all are, it would take Boeing around 149 months—just under 12.5 years—to clear the backlog at that rate, assuming they never sell another aircraft in the meantime.

Throw in supply chain issues that are still impacting Boeing—though much less so Airbus (EADSY), Boeing’s biggest competitor—and indeed, the 737 Max is still holding Boeing’s growth back. To what extent, however, is a matter for some debate.

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 16 Buys, three Holds and one Sell assigned in the past three months, as indicated by the graphic below. After a 12.42% rally in its share price over the past year, the average BA price target of $217.32 per share implies 2.26% upside potential.

See more BA analyst ratings

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