Shares of Boeing Co. (NYSE:BA) fell 13.6% in February, according to data provided by S&P Global Market Intelligence. The company's huge commercial arm is already trying to recover from the 737 MAX grounding, and now must deal with the COVID-19 coronavirus outbreak's impact on travel demand and airline expansion plans.
February was a tough month for airline stocks, with the sector battered by fears that the coronavirus would cut into demand and negate any growth the airlines had hoped for in 2020. That in turn could eat into long-term demand for new aircraft, or at least temporarily stunt the growth of Boeing's order book.
Boeing was already under pressure due to the grounding of the 737 MAX. It's been almost a year since the March 10, 2019, crash of an Ethiopian Airlines 737 MAX that killed all on board and prompted regulators to pull the plane out of service; airlines expect it to be at least the second half of 2020 before the plane is certified to fly again.
The MAX grounding is likely to cost Boeing billions of dollars, and the total is still growing. Boeing is already helping to prop up its supply chain during the 737 MAX production halt, and still has more work to do. In February it reportedly signed an agreement with General Electric to cover payments for jet engines, and it seems likely to be forced to agree to subsidize pilot training sessions for 737 MAX customers before the plane returns to service.
Boeing has already endured a reputational and financial hit due to the 737 MAX crisis. The impact of the coronavirus outbreak on travel is not likely to be as significant of a headwind for Boeing, but it's still another issue for new CEO Dave Calhoun to juggle.
Boeing remains a formidable aerospace and defense juggernaut, and its shares are now down 36% since the Ethiopian Airlines tragedy. Still, I'd advise investors to remain on the sidelines until there is more clarity about when the 737 MAX will fly again and how it, and Boeing, will be perceived by customers once it's back in service. Boeing has a strong set of assets, but too much has gone wrong at the company over the past few years for investors to give it the benefit of the doubt.