While BA boasts a robust 737 backlog, surging fuel prices will eventually result in delivery deferrals and potential cancelations. We are now forecasting 737 production to turn down in 2009 with a double-digit decline in 2010 and are thus cutting our 2009-2011 EPS estimates by $0.10, $0.55 and $0.35 to $6.75, $6.70 and $7.25, respectively. Our P/E multiple objective for BA has been reduced by 3 points to 10x, reflecting the bear market in aerospace and the likelihood that the OEM production cycle will begin to roll over stemming from cuts in narrow-body production.
The global economy not collapsing might be BA’s best hope:
The only good news is [this cyclical downturn] might not be as deep as past cycles given demand for aircraft globally has increased from previous cycles due to China , India and other rapidly developing economies.
AmTech maintains NEUTRAL on Boeing (BA), target price cut to $67.
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