This Just In: Upgrades and Downgrades

At The Motley Fool, we poke plenty of fun at Wall Street analysts and their endless cycle of upgrades, downgrades, and "initiating coverage at neutral." So you might think we'd be the last people to give virtual ink to such "news." And we would be -- if that were all we were doing.

But in "This Just In," we don't simply tell you what the analysts said. We'll also show you whether they know what they're talking about. To help, we've enlisted Motley Fool CAPS, our tool for rating stocks and analysts alike. With CAPS, we track the long-term performance of Wall Street's best and brightest -- and its worst and sorriest, too.

Analysts in aerospace
By now you've heard the news. After conducting additional preflight tests, Boeing (NYSE:BA) discovered an Achilles' armpit on its new 787 "Dreamliner." Right about where the wing connects to the fuselage, there's a weak spot (OK, 18 weak spots on each wing). And Boeing has canceled the plane's planned maiden voyage in order to fix them. This news translated into about $4 billion of lost market cap over the past two days.

Yesterday, Wall Street poured salt into Boeing's wounds, as two analysts downgraded the stock.

The highest-profile downgrade came from Wall Street wizard Morgan Stanley (NYSE:MS), which pulled its buy rating ("overweight," whatever), warning that we won't see the 787 take wing for as many as six months and suggesting that customers like All Nippon Airways, Delta Air Lines (NYSE:DAL), and Continental Airlines (NYSE:CAL) will have to wait until 2011 before actual plane deliveries commence.

Next door at Oppenheimer, analysts are both more, and less, optimistic about Boeing's fate. Regarding the business, Oppenheimer believes that Boeing will in fact begin delivering 787s in 2010 (albeit only 18, a dozen fewer than previously expected).

Now here's the interesting thing: Whereas Morgan Stanley thinks a 2011 delivery schedule justifies paying $50 a share for Boeing, Oppenheimer believes the stock will sink to $40 or so over the next 12 months.

Result: While Morgan Stanley sees Tuesday's development as a reason to sit a spell and see how things settle out, Oppenheimer went all in, and now recommends selling Boeing. Whom, I ask, are we to believe?

Let's go to the tape
Ordinarily, I'd set these two analysts in a head-to-head competition, see how their records on CAPS compare, and choose a winner. But we've got a little problem with that. Turns out, while Oppenheimer reports its ratings to Briefing.com, thus to be held accountable for its past advice, Morgan Stanley plays the wallflower. While occasionally venturing out with a public pronouncement, the analyst doesn't make it easy for people to keep track of how well its advice pans out.

Oh, well. As Donald Rumsfeld might say, we go to press with the information we have, not the information we wish we had. Herewith, Fools, is a summary of Oppenheimer's record in aerospace:

Nearly three years of data on Oppenheimer's stock picks reveal an analyst of only middling accuracy -- just above 50% -- that nonetheless manages to outperform more than 83% of the investors we track. Within aerospace in particular, while the sample size is small, so far it looks like this analyst is right on the money twice as often as it's wrong.

And Oppenheimer is right again
Sometimes, Fools, investing is about more than just numbers. Boeing's numbers, for example, tell the tale of a plane maker with more than $300 billion in backlogged business -- enough work to keep it busy for five-and-a-half years.

Problem is, the first step on this long revenue road is proving to be a doozy. Until Boeing gets its first 787 in the air, tested and certified, it can't even begin to deliver on all this potential. Meanwhile, that backlog is starting to evaporate as customers cancel orders (and demand penalty payments).

True, Boeing claims that "a relatively simple modification" is all that's needed to make its big bird airworthy. But after nearly two years of serial delay announcements, this company has shredded any veneer of credibility it once possessed.

This, plus Boeing's inability to posit even a tentative date for when it might fix this latest problem (and, mark my words, as the 787's testing progresses, this "latest" problem will not be the last), tells me we're in for a long flight delay before investors see any profits from owning this stock.

Foolish takeaway
In the fullness of time, Boeing will fix its problems and begin moving metal (er, carbon composites) again. Those of you in the stock for the dividend (and yes, it's pretty substantial) may want to bide your time alongside Morgan Stanley. "Hold until relieved" as it were.

On the other hand, if your investment thesis rests to any significant extent on Boeing making promises, keeping them, and adhering to any sort of dependable schedule, then my opinion is: Obey Oppenheimer.