Normally, a company preparing layoffs is welcome news for shareholders. It means reduced expenses as well as the fortitude required to make the toughest choices. For aerospace stock Boeing (BA), however, it meant more running for the door as shareholders sent shares down modestly in Monday afternoon’s trading.
Boeing announced plans to cut 10% of its workforce, a move that puzzled many, especially after the one-month anniversary of the machinists’ strike took place. The move is boiling down to the picket lines, as strikers are now concerned about whether or not they will have a job to come back to once the negotiations are done.
Boeing announced that it would no longer produce the 767 cargo jet at its Everett plant and revealed that 17,000 jobs—not just blue-collar, but also management and executive jobs—would be cut as Boeing faces a soaring debt load. This led some strikers to express the belief that Boeing is “…playing a game.” Specifically, a striker noted, “…a cat-and-mouse game.” This move comes just days after Boeing filed a formal complaint with the National Labor Relations Board (NLRB), alleging that the union is negotiating in bad faith.
Analysts Continue Support
Yet, even as Boeing attempts to right its course, some analysts are still on its side. Rob Stallard, for example, an analyst with Vertical Research Partners, declared that he set a Hold rating on Boeing despite the fact that “…it would have been a prime candidate…” for a Sell rating “…some time ago.” But Stallard noted that, thanks to the current “aerospace up-cycle,” Boeing will be an attractive buy for portfolio managers.
Counting on portfolio managers to continue to buy a company that is firing employees in the middle of a strike may not be the first tactic that comes to mind, but Stallard does raise some good points about the power of Boeing’s name recognition in aerospace. In addition, Seaport’s Richard Safran noted that there were good reasons to support Boeing, including likely government support and a potentially huge free cash flow yield to come.
Is Boeing a Good Stock to Buy Right Now?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on BA stock based on 15 Buys, four Holds, and two Sells assigned in the past three months, as indicated by the graphic below. After a 19.47% loss in its share price over the past year, the average BA price target of $202.39 per share implies 35.82% upside potential.
