It has finally happened, and things, somehow, managed to get even worse for Boeing (BA). The beleaguered aerospace firm’s machinists’ union is on strike for the first time in, at last report, 16 years. Investors, though, are rolling with the punches, as Boeing is only down fractionally in Monday afternoon’s trading. Reports note that the 2008 strike soaked Boeing for a $1.2 billion hit to its net income, and already, some are wondering just how long this strike will go for.
If it goes a similar length, then the costs will likely be similar, with a CNN report projecting another billion-dollar price tag afoot, especially if the strike runs long.
Boeing was already in trouble from the outset; the strike has not crippled Boeing, but rather, it has merely done it no favors. With a production cap still in place, Boeing has a pile of orders that it would have needed months, if not years, to fill, and therefore only has so much in the way of finished goods inventory to meet those goals. And with the 777X facing a set of problems itself, the plane that Boeing hoped might restart its profitability is facing limits right out of the gate.
Attempting to Respond
Thus, Boeing is now largely in a disaster mode. Reports from ABC News are looking for Boeing to start up temporary layoffs, which makes sense; without the production from the machinists’ union, there simply is not much for those other workers to actually work on. Plus, it would allow Boeing to save some cash.
Worse, it is an increasingly safe bet that the machinists simply will not listen to Boeing at this point. Reports from Reuters noted that Boeing had originally offered a 12% pay hike before doubling it to 25%. Either number is still well under the 40% that Boeing machinists originally sought. At this point, with Boeing flailing and reports out that it tried to low-ball the union originally, it is unlikely that Boeing machinists will hand over any further concession.
Is Boeing a Buy, Sell, or Hold?
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 24.09% loss in its share price over the past year, the average BA price target of $213.95 per share implies 37.1% upside potential.
