Aircraft manufacturer Boeing’s (NYSE:BA) 737 Max deliveries slipped in September to 15 units. This is the lowest delivery since May 2021, when it delivered 11 of the narrow-body jets. Meanwhile, it delivered 10 wide-body 787s and two 777 jets in the month. Notably, Boeing’s total commercial jet deliveries fell 6.3% year-over-year to 105 units in the September quarter. The current disruption in jet deliveries is owing to the recently discovered fuselage issue supplied by Spirit AeroSystems (NYSE:SPR).
Boeing made 22 of the 737 Max aircraft in September, lower than the average targeted production of 38 jets. The company recognized that the fastener holes on the aft pressure bulkhead of some planes had been inaccurately drilled. These were supplied by Spirit AeroSystems, which sources parts of its fuselages from multiple vendors. At the time, Boeing had already warned of missing delivery expectations in the September quarter.
Boeing’s 737 Max cost roughly $100 million, and the issue has cut the production of these jets to about half of their regular schedule. Even so, the company says that it could meet the lower end of its targeted 2023 deliveries of between 400 and 450 jets. For the nine months ending September, Boeing delivered 286 Max planes.
Challenges Continue to Impact Boeing’s Output
The delay in Max deliveries is also hampering Boeing’s customers. The large airlines have been attempting to increase flights as travel demand has picked up recently, especially with the holiday season in sight. The fuselage issue requires inspecting and fixing the mis-drilled fastener holes, which is going to take time. Although the error does not pose any flight risk, Boeing wants to ensure that they fix the issue at hand completely.
Boeing has been facing a series of challenges this year that are hampering its jet deliveries. To expand deliveries, the company is making efforts to ramp up production. In this regard, it has announced its intent to boost production of Max jets to a record-breaking 57 units per month by July 2025. In the meantime, its 787 Dreamliner jets are bagging more orders. Recently, Boeing secured an order for 18 787-10 widebody jets from Air Canada, as it tries to modernize its fleet and has retained the option to acquire an additional 12 aircraft. Boeing is also setting its eyes on opening its largest manufacturing facility outside of the U.S. in India.
Is BA a Good Buy Right Now?
Yesterday, research firm UBS initiated coverage of Boeing stock with a Buy rating and set a price target of $275 (42.1% upside). With the high demand for air travel currently, UBS believes that the decline in BA stock price has already accounted for the supply chain snarls.
Moreover, the firm models that Boeing’s free cash flows will grow at a compounded average growth rate (CAGR) of 36% from 2023 until 2027, despite the supply chain challenges.
Similarly, Bank of America Securities analyst Ronald Epstein maintained a Buy rating on BA stock with a price target of $300 (55% upside).
Overall, analysts are cautiously optimistic about Boeing’s stock trajectory. Based on 11 Buys versus six Hold ratings, the stock has a Moderate Buy consensus rating on TipRanks. Also, the average Boeing price forecast of $252.75 implies 30.6% upside potential from current levels. BA stock has lost 8.8% in the past six months.
