Last month a Boeing 737 Max crashed in Africa, previously one had crashed in South east Asia and all countries grounded the airplanes. Curiously, in the United States the home of Boeing, the country was the last to ground the planes. At the time, Boeing said it was a software problem.
It may be the answer, however according to an article in the Wall Street Journal by Doug Cameron and Andrew Tangel, Boeing has factored a $1 billion in costs for the grounding. One can understand why Boeing kept saying the plane is safe. The 737 Max represents a significant portion of the expected revenues and profits of Boeing for the next 5 years.
Boeing CEO Dennis Mullenburg said there had been no technical slip in the development of the plane. There was no surprise or gap or unknown here or something that somehow slipped through a certification process. Mr. Mullenburg said Boeing will soon be retesting the plane and building back trust with airlines and pilots.
During the first quarter, profit fell 13% to $2.15 billion while sales slipped 2% to $22.92 billion. The results show Boeing’s other aircraft for airlines and the military are robust limiting the decline of the effects of the Max 737.
Since the last crash of the Max 737 the shares of Boeing dropped $27 billion to the company being valued at $212 billion.
Boeing has over 5,000 orders for the Max 737 or roughly 40% of the annual sales and profits. Since the crash, Boeing stopped buying back shares and was expecting to deliver 57 planes a month up from 42. In March it delivered 5 planes and for the first time in 7 years had no orders for the planes.
Linking to dividend paying stocks, most dividend stocks are diversified which means if there is a downturn in one sector, another sector is hopefully doing well. The diversified portfolio of Boeing help keep the stock in the $385 range down from a high of $440. If you had bought in January for $323 you would still be up money and for those reasons you wish to keep the stock for the long term.
There are more questions than answers, till the next time – to raising questions.