Another big deal landed for aerospace stock Boeing (BA), and it might have come at the best possible time. Korean Air just agreed to buy 103 Boeing aircraft, which represents the largest order that Korean Air has ever placed with Boeing. And shareholders were over the moon, sending shares up over 3% in Tuesday afternoon’s trading.
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Korean Air’s planned purchase breaks down like this: it looks to bring in 20 of the 777-9, 25 of the 787-10, 50 of the 737-10, and, in an odd twist, eight of the 777-8, which is a freighter-class vessel. This is actually the first time that Korean Air has ever bought a 777-8F, reports noted, and brings Korean Air’s Boeing order for the year to over 150 units, adding to purchases earlier this year.
Korean Air CEO and Chairman Walter Cho noted, “Acquiring these next-generation aircraft is the core of our fleet modernization strategy, delivering significant gains in fuel efficiency and enhancing the passenger experience across our global network. This investment is also a critical enabler for our future as a merged airline with Asiana, to ensure that our combined carrier is one of the most competitive airlines in the industry.”
Potentially Great Timing
Now, we all know how Boeing’s production capabilities have been temporarily hobbled by the Federal Aviation Administration’s (FAA) production cap. But there are now plans to get some of the lines turned back on, though not without a condition or two.
The FAA wants to engage in “tabletop exercises” with Boeing before lifting the production cap. Tabletop exercises, or “scenario-based planning,” are a way to run down potential issues that may crop up as Boeing accelerates its production schedule. The exercises are still being developed, but must be close to ready, as the FAA looks for the exercises to be completed by the end of September. With such exercises complete, reports note, then the FAA has a framework by which it can approve such increases. So we could be looking at a ramped-up Boeing in time for the fourth quarter.
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 18 Buys and two Holds assigned in the past three months, as indicated by the graphic below. After a 31.1% rally in its share price over the past year, the average BA price target of $258.17 per share implies 10.26% upside potential.
