Boeing Climbs as Cowen Boosts Optimism Over Return of 737 Max

(Bloomberg) -- Boeing Co. led blue-chip stocks higher after an analyst suggested that the company is making progress toward persuading U.S. regulators to lift the 737 Max’s grounding early in the fourth quarter.

The Federal Aviation Administration’s certification flight to test key software changes -- a milestone in ending the flying ban in the U.S. -- could occur within four to six weeks, Cowen & Co. analyst Cai von Rumohr said in a note to investors. The recovery plan for the Max “looks intact.”

The shares gained 4.5% to $355.41 at 1:39 p.m. Thursday in New York, easily the biggest gain in the Dow Jones Industrial Average. Spirit AeroSystems Holdings Inc., which builds about 70% of the Max airframe, rose 3.8% to $76.87.

Boeing has estimated that it would present final paperwork to regulators next month, with the plane receiving certification to resume commercial flight early in the fourth quarter. The timetable could slip if a new issue emerges.

“We see it as highly unlikely that the Max fails to receive FAA certification,” von Rumohr wrote. “The core issue is, how long will it take to win its cert? In a realistic adverse case, this might drag until early 2020.”

Boeing Chief Executive Officer Dennis Muilenburg said in a July earnings call that if the grounding is lifted as expected, production could step up in phases next year to as fast as 57 jets a month. Suppliers had already begun building at that higher rate when Boeing slowed work in its factory after the Max was grounded worldwide in March following two crashes that killed 346 people.

Under a best-case scenario, suppliers could begin moving to that higher rate in the first half of next year, Reuters reported Thursday. The 600 or so companies that build parts for the Max typically move to a faster pace months before Boeing quickens production at its assembly lines in Renton, Washington.

The manufacturer’s assumptions around the Max’s return have proven over-optimistic before as regulators probed its flight-control system for potential hazards.

A three-month slip from Boeing’s early fourth-quarter target for the jet’s re-entry might spur a damaging rate cut and additional airline compensation claims of about $2 billion, equivalent to $2.75 a share, von Rumohr said.

To contact the reporter on this story: Julie Johnsson in Chicago at jjohnsson@bloomberg.net

To contact the editors responsible for this story: Brendan Case at bcase4@bloomberg.net, Tony Robinson

©2019 Bloomberg L.P.