Should Investors Ground Boeing Shares?

Stocks opened up today, with the Dow Jones Industrial Average (DJINDICES: ^DJI  ) and the broader S&P 500 Index (SNPINDEX: ^GSPC  ) up 0.09% and 0.51%, respectively, as of 10 a.m. EST.

Boeing: Should Investors Ground Boeing Shares
Yesterday, the crisis concerning Boeing's (NYSE: BA  ) new 787 Dreamliner went from bad to worse as regulators worldwide moved to ground the aircraft until the company can establish that its batteries are safe. The previous day, a second All Nippon Airways passenger jet was forced to make an emergency landing after an apparent fire. This is headline risk at its worst, but the market has remained remarkably sanguine in the face of these events: As of Thursday's close, shares of the Dow component were off just 3.5% from the 52-week high they set on Jan. 4.

Robert Crandall, the former CEO of American Airlines, put the issue in context, telling Bloomberg Television:

[The 787] is Boeing's largest and most important product for the next 15 years, so this is a big and concerning problem for both the airlines and Boeing. ... It'll be a very significant financial cost to Boeing. The good news from their point of the view is that the company has great financial resources and they'll overcome it. It's a big problem -- the magnitude of the problem isn't going to be known until engineers come up with what the solution is.

That uncertainty in terms of timing and ultimate cost is the potential source of share price volatility and, ultimately, capital loss. However, it's worth remembering that the 787 entered service more than three years late after a series of delays. The current reaction in the share price is similar to what happened when Boeing announced delays to the 787 launch in October 2007 and then in January 2008. That doesn't mean things things can't get worse for shareholders: In June 2006, Boeing's competitor Airbus announced that its A380 superjumbo jet would suffer a six-month delay, causing a 26% fall in the shares of its parent company, European Aeronautic Defence and Space.

Right now, potential Boeing investors should remain in a holding pattern. As for existing shareholders, the captain has requested they return to their seats and fasten their seatbelts -- they could encounter some turbulence up ahead.

With great opportunity comes great responsibility. For Boeing, which is a major player in a multitrillion-dollar market, the opportunity is massive. However, the company's execution problems and emerging competitors have investors wondering whether Boeing will live up to its shareholder responsibilities. In this premium research report, two of The Fool's best industrial-sector minds have collaborated to provide investors with the must-know info on Boeing. They'll update the report as key news hits, so be sure to claim a copy today by clicking here now.

Read/Post Comments (0) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2203816, ~/Articles/ArticleHandler.aspx, 9/26/2016 3:14:35 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,102.67 -158.78 -0.87%
S&P 500 2,146.61 -18.08 -0.84%
NASD 5,261.31 -44.43 -0.84%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/26/2016 2:50 PM
BA $130.94 Down -0.84 -0.64%
Boeing CAPS Rating: ****