Boeing's worst-case scenario is unlikely: Analyst

Nick Robertson
·Executive Producer
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Boeing (BA) is struggling to find some lift after reporting its worst quarterly earnings loss ever.

With the grounding of the company’s 737 Max plane, executives are scrambling to convince investors and industry analysts the company is equipped to weather the storm.

CFRA analyst Jim Corridore joined Yahoo Finance’s The Ticker to explain why, despite Boeing’s quarterly flop, he’s maintaining his Buy rating on the stock.

2020 earnings at risk?

“Boeing’s best-case scenario is the plane starts flying again in October — they start resuming deliveries, and they can move to get [737 Max] production up back from 42 a month to 52 a month sometime in mid-2020,” according to Corridore. “Worst-case scenario is FAA regulators push back, Boeing does not re-certify the plane before the end of the year, and the company is forced to make production cutbacks and temporarily halt production.”

SEATTLE, WA - JUNE 27: Boeing 737 MAX airplanes are stored on employee parking lots near Boeing Field, on June 27, 2019 in Seattle, Washington. After a pair of crashes, the 737 MAX has been grounded by the FAA and other aviation agencies since March, 13, 2019. The FAA has reportedly found a new potential flaw in the Boeing 737 Max software update that was designed to improve safety. (Photo by Stephen Brashear/Getty Images)

Corridore remains confident that Boeing is on a path to resolving the 737 Max’s extensive flaws with the Federal Aviation Administration (FAA) sooner rather than later.

“Boeing has been working with the FAA all through this process,” Corridore explains. “The FAA is sitting at Boeing’s production facilities as they test the plane as they go through simulator testing. The FAA has pushed back on Boeing asking for certain changes to software. So they are working hand-in-hand.”

Despite Boeing’s ongoing problems with the 737 Max grounding, it reported an impressive 5,500 commercial planes on order overall and a total backlog worth $474 billion. Just this week it finalized a deal worth more than $6 billion to sell 20 of its 787 Dreamliner jets to Korean Air.

But Corridore makes clear that Boeing’s time is increasingly limited.

“These [737 Max] planes need to start flying, and they need to start flying by the fourth quarter. Otherwise, it puts the 2020 earnings story at risk,” he warns.

Nick Robertson is a senior producer at Yahoo Finance.

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