Boeing (BA) Clobbered By Airline Disaster, Goldman Cuts To SELL

Goldman cuts Boeing (BA) to SELL on slowing jet orders and is now Neutral on aerospace parts makers Textron (TXT) and Precision Cast (PCP). In fact, the bank has downgraded the entire Aerospace sector from Neutral to CAUTIOUS. Why? The same culprits that are sinking automobiles, airlines, shipping, restaurants, and a host of other industries:

  • high fuel prices
  • economic weakness

Specifically, now that airlines are trying to save themselves by mothballing existing planes, they don’t need to buy new ones. As a result, they’re delaying or cancelling orders.

Goldman downgrades Boeing (BA) from Neutral to SELL, target price $60. BA has been added to Goldman’s Conviction Sell List.

Goldman downgrades Textron (TXT) from Buy to NEUTRAL.

Goldman downgrades Precision Cast (PCP) from Buy to NEUTRAL.

On cue today, the Wall Street Journal had a critical article about Boeing and Airbus today:

the landscape is shifting as oil prices rattle the underlying economics of the airline industry…The combined value of the orders for Airbus and Boeing planes exceeds $500 billion at list prices, so large-scale cancellations and deferrals could easily amount to tens of billions of dollars.

Officials at Boeing and Airbus, a unit of European Aeronautic Defence & Space Co., say orders for their jets are spread across a diverse group of carriers world-wide, insulating them from regional economic swings. But they acknowledge that they are in almost daily talks with airlines seeking to cancel or defer deliveries. Although most of these discussions involve U.S. carriers, signs of stress have emerged from India to Europe….

25% to 30% of the two makers’ order books — roughly equivalent to the number of planes that were intended to accommodate airline growth rather than replace ageing planes — could be subject to what he called the “flake-out factor” if oil prices continue their unprecedented rise.

See Also:
GAO Agrees That Air Force Screwed Boeing (BA) Out of Contract, But Won’t Help Stock
Boeing (BA): Too Much Pressure From High Fuel Prices
Boeing (BA) Socked By High Oil, Flailing Airlines; Lehman Says No Worries

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