Boeing Relocates HQ to Virginia; Shares Down 4.1%

Boeing (NYSE: BA) revealed its plans to shift its global headquarters from Chicago to its Arlington, Virginia campus.

The decision was based on Virginia’s closer proximity to Boeing’s global customers, including the biggest U.S. military contractors, along with regulators, lawmakers, and officials from the Pentagon.

In addition, Boeing plans to develop a research and technology hub in Virginia to tap the engineering talent in the region and enhance the company’s global engineering network. The hub will work on new innovations in the areas of cyber security, autonomous operations, quantum sciences, and software and systems engineering.

However, following the news, shares of the world’s largest aerospace and defense company were down over 4% to close at $150.47 on May 5.

Further Details

Adapting to the changing environment, over the past two years, Boeing has implemented flexible and virtual solutions that enable the company to reduce its office space needs.

Likewise, the company stated that its requirements for the employees at its Chicago office had been reduced.

However, the company added that its three business units: Boeing Commercial Airplanes in Seattle, Washington; Boeing Global Services in Texas; and Boeing Defense, Space, and Security in Arlington, Virginia, will continue their operations at their current respective headquarters.

CEO Comments

Boeing CEO, Dave Calhoun, commented, “In today’s business environment, we have adopted a flexible work strategy in parts of our company and are taking steps to be more efficient within a reduced footprint. This helps us channel investments toward our critical manufacturing and engineering facilities and training resources.”

Wall Street’s Take

On May 2, BofA Securities analyst Ronald Epstein decreased the price target on Boeing to $180 (19.63% upside potential) from $220 and reiterated a Hold rating.

Epstein reduced the price target after Boeing’s market share fell below Airbus’. Airbus is benefiting from a strong order backlog as well as growing EU defense budgets.

Epstein stated, “In the next five years, Boeing faces headwinds. Boeing needs to overcome or at least stem the market share loss in the large narrowbody market (Boeing order market share of 13% for the 737 MAX 9/10 vs. Airbus 87% for the A321neo) as well as manage production issues on the 787 and the 777X.”

Consensus among analysts is a Strong Buy based on 15 Buys and three Holds. The average Boeing stock forecast of $228 implies 51.5% upside potential to current levels.

Conclusion

Boeing has struggled with various issues in the past few years following plane crashes, increased Federal Aviation Administration scrutiny, and production issues, to name a few. Shares are down almost 35% over the past year.

Investors can hope that relocation of Boeing’s headquarters and the new hub with top-class engineering and technical talent may help the company solve some of its issues.

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