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Boeing stock lower
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November 1, 1999: 12:14 p.m. ET
Profit-taking, Sunday's crash of EgyptAir flight join to prompt selling
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NEW YORK (CNNfn) - Boeing Co. stock retreated Monday in the wake of the crash of one of its 767 aircraft over the weekend, but analysts suggested that profit-taking could be as responsible as the bad news for the selling.
Boeing (BA) shares lost 2-1/8 to 43-15/16 at midday.
The cause of the crash of EgyptAir flight 990 early Sunday isn't known, but some previous high-profile crashes have led to expensive changes in some Boeing aircraft in recent years.
Selling prompted by profit taking?
Analysts are generally bearish on the stock. They point to the run-up from 39 in the last three weeks and say it is trading at or above some 12-month target prices.
"I think profit-taking may be part of the issue here," said Joseph Nadol, of Donaldson, Lufkin & Jenrette Securities. "I have a market performance rating on the stock because of their fight against Airbus (Industrie) and declining orders in backlog. I think that the crash alone as a reason to sell could be over-done." Nadol's 12-month price on the stock is only 42.
Analysts believe the run-up in Boeing stock the last three weeks may be more responsible for Monday's selling than the crash of one its aircraft early Sunday.
Questions on future earnings
The recent stock rise followed stronger-than- expected earnings and some better-than-expected projections on deliveries in 2001.
Boeing posted income of $477 million, or 56 cents a share diluted, in the third quarter, not counting non-recurring items. That was up more than a third over the year-earlier period and 8 cents better than the consensus estimate of analysts surveyed by First Call.
But that's not convincing many of the analysts to get bullish on the stock, with more than half having a "neutral" or "hold" position on the stock and only one holding a "strong buy" recommendation. Analysts are looking for 64 cents a share earnings in the fourth quarter, and EPS in the low 50-cent range each period next year.
"They're doing a great job cutting costs," said Nadol. "I'm just concerned about where market conditions are going the next 12 months."
Nadol and Glenn Stewart, analyst with A.G. Edwards & Sons, say that it is much too soon to know if Boeing has any liability due to the events of the weekend. Stewart, who believes the 12-month price for the stock is only in the 45-50 range, says there is clearly a risk for the company from a crash, but the fundamentals also don't justify much upside in the price.
"I don't think there's a tremendous overreaction here, even if the investors who are selling in lieu of events of the weekend aren't focusing on earnings and earnings growth," Stewart said.
The aircraft maker also got hit by reports over the weekend that a newly uncovered 19-year-old study of fuel tanks in the military version of the Boeing 747 would have helped investigators looking into the cause of the TWA Flight 800 crash in July 1996.
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