Boeing announced the end of the production of 747 due to the decline of orders and pricing pressure. The company recently surpassed the analysts’ expectations on its second quarter earnings report.
The American aircraft company cancelled its initial plan of increasing the production of the 747. Boeing was reported of making one plane each month starting 2019, however, it was changed to one and a half in June 2015.
Boeing admitted if they are unable to obtain sufficient orders and/or market, production and other risks cannot be mitigated, they could record additional losses that may be material, and it is reasonably possible that they could decide to end production of the 747.
Boeing’s 747 Problem
After the earnings report of the company, Chief Executive Dennis Muilenburg confirmed that they decided to reduce future production expectations and revenue assumptions to account for current and anticipated weakness in the air cargo market. However, they will continue to see the 747 as a unique and significant value creator for their customers over the long term.
In-line with this, automobile industry has been struggling to survive in the market after the massive recalls, congressional hearings, record fines, and charges related to the safety of the units. Boeing and Airbus dealt with various concerns on their passenger jets as the demand for the units stayed low. Also, the aircraft companies announced a downbeat forecast for the freight market.
Boeing’s 747 costs around $149 million, lower than the actual price of a new 747-8 passenger jet which is $378.5 million, or the freighter version at $379.1 million. The company has only taken 10 orders of the unit since the start of 2015. Adding to this, there has been 21 orders of the jumbo jets on its backlog, 11 for the freighters and another 10 passenger jets.
Surprisingly, the second quarter earnings of the company were mainly supported by the positive contribution of the passenger jet and the defense business sector. Boeing is divided into five divisions which are Boeing Commercial Airplanes (BCA); Boeing Defense, Space & Security (BDS); Engineering, Operations & Technology; Boeing Capital; and Boeing Shared Services Group.
Boeing Stock Performance
Boeing Corporation traded 2.17 percent lower to $133.01 after opening by $135.40. The American aircraft manufacturer had a market capitalization of 85.43 billion and a dividend yield of 3.28 percent. It has a price earnings ratio of 24.43 with a 50-day moving average price of $130.80 and a 200-day moving average price of $127.54.
The stock has a 12-month low of $102.10 and a 12-month high of $150.59. Last Wednesday, Boeing reported an earnings per share of $0.44 and a profit of $24.80 for the quarter. The revenue of the company rose by 9 percent on an annual basis. Further, the company is set to pay its quarterly dividend on the second of September.
Currently, the aircraft company has an average rating of Hold and a consensus price target of $148.19. In-line with this, Goldman Sachs Group announced a Sell rating for Boeing and a price target of $107.00 with a possible downside of 21.30 percent based from the recent price of the stock.
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