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Boeing (NYSE:BA) on Tuesday was downgraded to Sell from a prior investment rating of Neutral by analysts at Northcoast Research. They said the airplane maker isn’t likely to increase its output of commercial jets amid constraints on the global supply chain.
“After communicating with high-level industry contacts, we can now see several turbulence blips on the radar screen with darker clouds forming around the aerospace bellwether peer group,” Chris Olin, analyst at Northcoast, said in an April 4 report.
The ability of Boeing (BA) to increase deliveries of the 737 single-aisle jet to 38 a month this summer and for rival Airbus (OTCPK:EADSF) (OTCPK:EADSY) to make more A320 jets is being questioned by Northcoast’s industry sources. Their concerns include “jet engine output uncertainty; new asset or supplier learning curves; irrational order activity, and mixed-messaging throughout Europe,” the report said.
One of the biggest concerns is whether engine maker CFM International can deliver enough of its leading-edge aviation propulsion, or LEAP, engines to Boeing (BA) and Airbus (OTCPK:EADSF) (OTCPK:EADSY), according to Northcoast.
"Recent channel checks reveal a rising level of contact anxiety tied to early channel reports about lagging engine output and future supply chain destabilization," the report said. "The stage looks nearly set for a 1H23 engine delivery disappointment and subsequent adjustment to 737/A320 production schedules."
This negative sentiment is surprising following General Electric's (GE) upbeat forecast last month for jet-engine output, according to Northcoast. CFM International is a joint venture between GE (GE) and France's Safran Aircraft Engines.
The firm cut its estimate for Boeing (BA) by $1.10 a share to a loss per share of -$1.74 a share for 2023. The firm also set a 12-month price target on Boeing (BA) of $180 a share.
Boeing (BA) next week will publish its order and delivery data for March. Financial services firm Baird yesterday said it expects Boeing (BA) to report deliveries of about 67 commercial airplanes for the month, bringing the quarterly total to about 133.
