What happened
Boeing (BA 3.01%) made a big move to put part of its troubled past behind it, but the aerospace manufacturer also apparently has fallen out of favor with what had been a key customer in China. Investors are disappointed, sending shares down nearly 5% in Friday trading.
So what
Boeing has taken its investors on a turbulent ride over the past few years.
The company's 737 MAX, which was once billed as having the potential to be the top-selling aircraft of all time, was involved in fatal crashes in 2018 and 2019 that led to the plane being grounded for 18 months and prompted a comprehensive review of Boeing's engineering and safety practices. The company is still feeling the impact of that review, with the 787 Dreamliner only recently cleared by safety regulators.
The pandemic added to Boeing's woes, cutting demand for new aircraft. But with the 737 MAX flying again and airlines beginning to rebound post-pandemic, Boeing is trying to get airborne again.
NYSE: BA
Key Data Points
Late Thursday, the Securities and Exchange Commission announced a settlement with Boeing and former CEO Dennis Muilenburg relating to charges that the company and its management misled investors about the 737 MAX. As part of the settlement, Boeing will pay $200 million in fines, and Muilenburg will pay $1 million.
On Friday, Boeing investors woke to another piece of bad news. Archrival Airbus (EADSY 2.73%) announced that China's Xiamen Airlines, which until now has been an all-Boeing operator, has placed an order for 40 Airbus A320neo aircraft. Xiamen's major shareholder, China Southern Airlines, is perhaps Boeing's most important customer in the region, and the Airbus deal demonstrates the challenge Boeing is facing selling planes in China.
Now what
The two news items, when viewed together, provide a pretty good summary of where Boeing is right now. The company's worst days are hopefully behind it, but the path ahead remains difficult. The 737 MAX still is not cleared to fly in China, and Boeing sales seemingly are getting caught up in rising geopolitical tensions between the U.S. government and its Chinese counterpart.
Boeing enjoys a duopoly with Airbus in a market that over the long term is expected to grow, and the company appears likely to participate in the post-pandemic aerospace recovery. But the Xiamen order is a warning that Boeing seems to be losing pace, and market share, in the all-important narrow-body jet market.
Barring the unexpected, Boeing stock should climb over time as the company begins to turn the page and normalize operations. But there's enough uncertainty to raise real questions about Boeing's ability to be a market-beating stock over the next couple of years. Investors would be wise to take a cautious approach to this aerospace giant.
