Boeing Shares Slide as Panel Failure Spooks Investors

Key Morningstar Metrics for Boeing

• Fair Value Estimate: $232.00
• Morningstar Rating: 3 stars
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: High

Shares in aerospace giant Boeing BA fell nearly 9% on Monday, following the grounding of 171 Boeing 737 MAX 9 aircraft. The move was made because a door panel fell off during Alaska Airlines Flight 1282 on Friday. The Federal Aviation Administration ordered the temporary grounding of the planes while safety inspections are ongoing. Boeing is expected to hold a companywide meeting Tuesday to discuss safety.

The incident came just days after an Airbus A350 operating as Japan Air Lines Flight 516 burst into flames after colliding with a Japanese Coast Guard aircraft on a runway. Neither event was fatal, though it is believed deaths were avoided in the earlier one because quick-thinking crewmembers advised passengers to leave their belongings behind.

Morningstar industrials analyst Nicolas Owens says Boeing is still working out flaws in its 737 and 787 planes. Investors could be forgiven for being cautious. “Investors in Boeing and Airbus bank on the long-term durability and safety records of the companies’ products and their ongoing obligation to adhere to the strictest product governance standards to meet safety requirements,” he says.

“The fatal crashes of two Boeing 737 MAX 8 aircraft in 2018 and 2019 caused grave consequences for Boeing, including the grounding of the entire 737 MAX fleet by global aviation regulators for nearly two years, precisely because they called into question Boeing’s ability to fulfill its product governance commitment,” Owens continues. “To this day, Boeing is working out flaws in its manufacturing processes for new 737 and 787 jets that came to light under intense scrutiny following those crashes. The 737 MAX 7 and MAX 10 variants have not yet been certified as airworthy by the FAA, though we think they eventually will be.”

On Jan. 6, the FAA announced that 171 MAX 9 jets of the same type as Alaska Flight 1282 must be inspected before they can fly again. “At this point, we do not believe those inspections or any revision to how the MAX 9 fuselages are made by Spirit AeroSystems Holdings SPR as a supplier to Boeing will have a material financial impact on Boeing or its customers, and our $232 fair value estimate is unchanged,” Owens says. “However, the dramatic nature of the flaw will once again have customers, regulators, and the flying public calling Boeing’s product governance into question.”

Investors are gearing up for a muted Monday after the Dow Jones Industrial Average showed Boeing under particular pressure. Futures on the index fell nearly 200 points amid a sharp fall in China stocks and fears over draconian regulation.

This story is being updated as events progress today, Monday, Jan. 8.