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Boeing rides out bad news
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November 11, 1999: 5:02 p.m. ET
Reports of production cuts, labor talks do little to scare away investors
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NEW YORK (CNNfn) - Boeing Co. stock rode out the latest in a recent string of turbulent news reports Thursday with barely a bump, as reports of production cuts and labor negotiations didn't scare away many investors.
The stock closed Thursday at 41-5/16, down 7/16, or 1 percent, on volume that was 12 percent heavier than the 10-day average for the stock.
A report in the Seattle Times that the company was cutting production schedule for the 757 and 767 aircraft irked company officials, but did little to rile Wall Street.
"We've known this for, good God, it goes back almost a year now," said Byron Callan, analyst with Merrill Lynch & Co., about the company's delivery plans for the two aircraft. "Probably a lot of people who don't own Boeing stay away from it for this reason, but those that do had already accounted for it."
Boeing (BA) said it is still on target for delivery of about 480 commercial aircraft next year, down 23 percent from expected deliveries of 620 this year.
Labor talks with engineers heat-up
Boeing also faces contentious negotiations with the Society of Professional Engineering Employees in Aerospace for 23,000 engineering and technical workers in Washington state whose contract expires Dec. 1. Another 1,500 SPEEA members are covered under a contract that expires Dec. 5.
Union officials were saying Wednesday they could not recommend the company's most recent offer. Company spokesman Peter Conte said that was not its best and final offer, though, and that he expected that to be presented to the union Thursday evening for the workers whose contract expires Dec. 1.
A month's worth of bad news
The company has also been faced with reports that a parts problem temporarily halted deliveries earlier this month of four of its six commercial aircraft models, including the 757 and 767. The company revealed this week that problem is more widespread than originally thought, affecting an air duct in addition to a drip shield. But company spokesmen insist that problem is now well in hand. The first delivery with the fixed parts is due Friday.
Beyond those immediate problems, Boeing faces the investigation into the Oct. 31 crash of a EgyptAir 767, along with questions whether it should have released an internal study of fuel tank problems to investigators looking at the 1997 crash of the TWA flight 800.
The stock has lost 10.3 percent since the end of October, but some analysts believe that was partly due to profit-taking after a run-up in the price last month.
"They're in a rough patch of news flow," Callan said. "I really think the fundamentals are a lot stronger than the recent news."
Slowing sales for 757
New orders have been stronger this year for European competitor Airbus Industrie, but many of those orders are to aircraft lessors who are paying less for the aircraft, said Callan. But the Airbus A321 may be eating into some of the sales of the narrow-body Boeing 757.
Boeing officials said that the Seattle paper overstated projected cuts in production. Craig Martin, a Boeing spokesman, said that deliveries of the narrow-body 757 aircraft next year may be a bit softer than the 53 aircraft the company projected for that period early this year, down from the 67 it projects for this year. But he said next year's deliveries shouldn't be significantly off from that number.
"We have not seen anything to suggest that we're going to be a long way away from that (53 deliveries)," he said. "It is true that the (newly introduced) 737-800 is probably cannibalizing some sales that might have gone otherwise to 757-200. And I suspect it (sales of A321) is also a component. It's a mixture of a number of factors out there in the world that plays into this."
Boeing sells the 737-800 for $51 million to $57.5 million, while it sells the 757-200 for $65.5 to $73 million.
The company projected delivery of 42 wide-body 767 next year, compared with 45 expected to be delivered this year.
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Boeing Co.
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