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Boeing’s stock soars, 787 soon to follow

Written By: Marley DelDuchetto on March 13, 2013 No Comment
Photo courtesy of Boeing

Photo courtesy of Boeing

The Boeing Co.’s Dreamliner 787 may be grounded but shares of the Chicago-based company have taken off to levels not seen in five years.

Boeing’s stock opened Wednesday at $84.16 and rose quickly to $84.78, above its 52-week high of $84.62 and the highest level since April, 2008.  Shares ended the day at $84.75. The move came amid reports that Boeing is set to announce one of the largest orders in the company’s history later this week: an $18 billion order from Ryanair.

Irish newspaper the Irish Independent reported that the Dublin-based airline has ordered 200 Boeing jets, totaling $18 billion.  Ryanair currently flies Boeing’s 737 airplanes and operates approximately 1,500 flights per day.  The Chicago Tribune also reported a deal was in the works between the two companies earlier this year.

Randy Tinseth, Boeing’s vice president of marketing for Boeing Commercial Airplanes, fueled rumors Tuesday at a conference in Florida. “The data tells us the market is strong and will continue to be strong,” he said, according to a company press release.  “That’s why we’re confident as we raise our production rates. Supply and demand will continue to be in balance as we put more airplanes into the hands of our customers.”

Other welcomed news for Boeing came Tuesday from the Federal Aviation Administration: the company’s plans to certify new batteries for its 787 Dreamliner were approved.

The first phase involves a series of 20 separate lab tests.  If the proposed fixes for the lithium-ion batteries pass, test flights will be allowed.

“This comprehensive series of tests will show us whether the proposed battery improvements will work as designed,” U.S. Transportation Secretary Ray LaHood said in a statement. “We won’t allow the plane to return to service unless we’re satisfied that the new design ensures the safety of the aircraft and its passengers.”

Boeing said the fire-plagued batteries’ flaw was primarily due to short-circuiting, which led to overheating.  According to the FAA, the design changes include improved insulation of the battery’s eight cells and the addition of a new containment and ventilation system.  If Boeing’s results meet study expectations and pass all tests, the grounding could be lifted as soon as April, a company report said.

Boeing CEO Jim McNerney said in a statement that the FAA’s approval “is a critical and welcome milestone toward getting the fleet flying again and continuing to deliver on the promise of the 787.”

The grounding of the 787 Dreamliner marked the first time since 1979 that the FAA ordered an entire fleet to stop flying for safety reasons. The aircraft is Boeing’s most technologically advanced plane to date, but it has been plagued with production delays and critical function issues.  Its grounding on Jan. 16 came on the heels of one of Boeing’s most productive years, with more than 1,200 net orders.

“Boeing delivered more commercial aircrafts than Airbus in 2012 for the first time since 2002.  We expect this to be the case once more in 2013,” Robert Spingarn, an equity research analyst at Credit Suisse.

Since the grounding, Boeing’s shares are up more than 13 percent, well ahead of the S & P 500’s gain of 6.4 percent in the same period.  As a component of the Dow Jones industrial average, Boeing’s gains have been a contributor to the Dow’s recent all-time highs, adding close to 80 points, or more than 13 percent, to the Dow’s advance, according to the Wall Street Journal.

A recent Credit Suisse report said the stock’s advance means investors realize the grounding and subsequent testing will have little effect on the company overall. “From a [profit and loss] perspective, we think the actual cost will be fairly insignificant,” Spingarn said.

On Wednesday, Boeing shares rose $0.59, or approximately 1 percent, to close at $84.75.

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