Boeing Stock In Focus After 777x Launch Pushed To 2027, Adding Billions In Cost Overrun
A Bloomberg report stated that analysts expect the non-cash accounting charge from the delay to be between $2.5 billion and $4 billion.
Boeing (BA) stock drew retail attention after hours on Thursday after a report stated that the first commercial flight of its long-delayed 777X model will take place in 2027, rather than next year.
According to a Bloomberg News report citing people familiar with the matter, Deutsche Lufthansa AG, the launch customer for the wide-body aircraft, is already making plans after accounting for the delay. The report further stated that analysts expect the non-cash accounting charge to be between $2.5 billion and $4 billion; however, Boeing has not reportedly revealed any estimates.
Retail sentiment on Stocktwits about Boeing was still in the ‘bullish’ territory at the time of writing, while the retail message volume was ‘high.’
Last month, Boeing CEO Kelly Ortberg said that ‘a mountain of work’ is still there before the certification of the 777x model, but the aircraft has not faced any new technical challenges. “Even a minor schedule delay on the 777 program has a pretty big financial impact because we’re in a reach-forward loss situation,” he said at the Morgan Stanley Laguna conference.
The aircraft was initially slated to enter service in 2020. It is key to the planemaker’s ambitions to wrest market share from European rival Airbus in the lucrative long-haul market, as well as to generate free cash flow. The report stated that Boeing executives will likely discuss the extent and cost of the latest delay in the launch of the widebody aircraft when Boeing reports earnings on Oct. 29.
The aerospace giant has reportedly incurred $11 billion in cost overruns for the 777X, which has encountered a string of setbacks and faced scrutiny from the Federal Aviation Administration in the aftermath of two fatal 737 Max crashes in 2019 and 2020.
The report further stated that since the program is in a reach-forward-loss position, Boeing will not recover its development costs across the first 500 airplanes it builds and sells. The company must immediately book any additional abnormal costs and overruns as a charge to earnings.
“Boeing has a huge backlog on the 787 and on the MAX, and therefore, what is important for the stock price is to ramp up production on those models,” one user noted after saying that it will be “pretty good” if the company manages to obtain licenses for 737 Max-7 and 737 Max-10 variants in the coming months and the 777x by early 2027.
Separately, Reuters reported, citing a company memo, that Boeing intends to replace striking St. Louis-area workers at its defense unit with new hires by the end of the year. The report stated that the first group of replacement workers for munitions production and assembly mechanics will begin training on Friday.
More than 3,200 workers have been on strike since Aug. 4.
Boeing stock has gained nearly 22% this year.
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