Shares of Boeing (NYSE:BA) dropped 10.7% in October, according to data provided by S&P Global Market Intelligence, as the saga surrounding the company's grounded 737 MAX continued to weigh heavily on the company. The month ended with CEO Dennis Muilenburg being grilled by Congress, a sign of how deep Boeing's woes are at the moment.
Boeing has deservedly taken a lot of heat from regulators and the press in the months since an Ethiopian Airlines flight crashed, killing all 157 people on board. It was the second fatal crash for Boeing's new 737 MAX in a matter of months and started a process of discovery that has at times portrayed the aerospace giant in a negative light.
The company mid-month reported third-quarter adjusted earnings of $1.45 per share, missing analyst estimates, on revenue that at $19.98 billion was down 20% year over year. Investors had expected a weak quarter, but news reports suggesting Boeing employees misled the Federal Aviation Administration (FAA) about the safety system that eventually led to the grounding of the company's 737 MAX aircraft raised new concerns about management's credibility.
Boeing investors were also treated to an onslaught of gripes from airlines including American Airlines Group, Southwest Airlines, and United Airlines Holdings that have seen their schedules disrupted by the MAX issues and are likely to demand significant compensation from the manufacturer. As American Airlines CEO Doug Parker said during a post-earnings call with investors: "We're working to ensure that Boeing shareholders bear the cost of Boeing's failures, not American Airlines' shareholders."
Boeing shares have made up about half of October's declines in the first week of November, and the company remains confident that the 737 MAX will be recertified in the months to come and be flying again by early 2020. Assuming so -- and that there are no further incidents -- it seems likely that the 737 MAX, despite all the 2019 headlines, will go on to be the best seller that analysts had originally predicted it to be.
That said, Boeing shares are hardly on sale today, up 10% year to date despite the controversy, and the company has had a number of other embarrassing setbacks beyond the 737 MAX that has raised alarming questions about management's control of the portfolio. Boeing has a lot to prove before I'd recommend climbing on board.