The federally-mandated production cap imposed on aerospace stock Boeing (BA) has been around for some time. And that in turn has led to a growing number of delays in the field as airlines try to work around a deliberately hobbled Boeing. There will be no relief in sight, however, as word from the Trump administration says the cap stays. That sent Boeing shares down modestly in Friday afternoon’s trading.
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We already knew that the Trump administration would be looking for “tough love” with Boeing, but there was a possibility that the cap could come off as Boeing has already made substantial advancements in revamping its culture and making its planes less prone to falling apart in certain situations, including actually getting airborne.
But the word from Sean Duffy put those hopes aside for now, as he said “The cap will be maintained and will be lifted when I, in consultation with the career safety experts at FAA and the Administrator, have confidence that a production increase will not reduce the quality of the aircraft being produced.” For its part, however, Boeing refused comment.
Throwing Monkeywrenches Just Everywhere
The cap will keep Boeing able to produce just 38 737 Max planes per month, a move that is not sitting well with airlines. A second report notes that Boeing’s ongoing delays just hit American Airlines (AAL) as well.
Thanks to the delays at Boeing, American is now shutting off three planned routes to Europe, which were set to go live this summer. Those routes were headed to Paris, Frankfurt and Madrid, but now they will never leave the terminal. Further, the planned rollout of the Flagship Suite business class flight will also be on hold, thanks to Boeing’s troubles in getting 787 aircraft off the line and to those who actually bought the things to begin with.
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, five Holds and one Sell assigned in the past three months, as indicated by the graphic below. After a 12.94% loss in its share price over the past year, the average BA price target of $190.50 per share implies 8.14% upside potential.
