Boeing Stock Could Face More Headwinds in 2020

boeing stock

Boeing (NYSE: BA) stock price plunged to the lowest level in the past 52-week following a credit rating downgrade from S&P Global Ratings. Concerns over mounting debt, cash flow generation and big losses have been adding to bearish sentiments. Charges related to 737 MAX crises could lead the company to post a big loss for the final quarter of 2019. In addition, analysts have also lowered their price targets for BA share price.

Boeing stock price lost significant value in the past few quarters due to grounding of 737 MAX. BA share price is currently trading around $320, down from 52-weeks high $450 a share. Some investors are seeing the share price selloff as a buying opportunity while others are expecting BA shares to extend the selloff.

BA The Boeing Company daily Stock Chart

Credit Ratings Could Negatively Impact Boeing Stock Price

The market analysts and rating agencies have started showing concerns over the credit potential. For instance, S&P Global has declined BA credit ratings to negative from A. The firm has declined the credit ratings due to rising costs and cash outflows. Previously, Fitch dropped its ratings from stable to negative for Boeing’s credit potential. The firm anticipates a huge drop in cash flow ratios along with a boost in debt-related ratios.

This will result in a longer period of cash outflows than we expected for 2020, as well as less debt reduction in the latter half of the year because Boeing will deliver fewer aircraft,” S&P says.

Q4 Earnings Could Create a Huge Impact

The company is likely to experience a massive decline in revenue and earnings for the final quarter of 2019. Charges related to 737 MAX could place the company in a difficult financial position.

Vertical Research analysts Robert Stallard and Karl Oehlschlaeger anticipate BA to experience big losses in the coming quarters. This is because they forecast delays in deliveries of the most profitable product line combined with the boost in customer compensation costs. The firm said, “We are expecting Boeing’s up-coming results to be ‘an absolute disaster,’ and that now looks guaranteed.”

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Based in Saudi Arabia, Siraj has a strong understanding of and passion for accounting and finance. He has worked for international clients for many years on several projects related to the stock market, equity research and other business, accounting and finance related projects. Siraj is a published financial analyst on the world's leading websites including SeekingAlpha, TheStreet, MSN, and others.

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