Boeing Shares Suffer Worst Two-Day Drop on Record

(Bloomberg) -- Boeing Co. shares plummeted 14% to a three-year low on Thursday, alongside airline stocks, as the growing coronavirus crisis prompted a restriction on travel from Europe to the U.S. The news comes after Boeing said Wednesday it was planning to draw down the full amount of a $13.8 billion loan, sparking investor concerns about liquidity.

The stock has lost a record 29% of its value in the last two trading days. JPMorgan downgraded shares, saying a dividend cut may be in the cards while price targets were slashed across Wall Street. Despite that, some analysts said the two-day slide was an overreaction, and the company was not in a liquidity crisis, even though pressures are rising.

The global coronavirus pandemic has upended the airline sector worldwide, forcing companies to cancel flights, cut capacities, and withdraw financial guidance amid growing uncertainty. That is having a direct impact on Boeing as carriers are choosing to delay or drop aircraft orders at a time when the company was already struggling to sort out its troubles related to the 737 Max aircraft.

Bloomberg BDVD estimates show Boeing’s quarterly dividend is so far expected to be maintained with the next declaration in April.

Here’s a round up of the analyst commentary.

JPMorgan, Seth Seifman

“Our desire to hang in with Boeing until the return of the 737 MAX has worked out poorly, both regarding the timeline for re-certification and now more importantly with the impact of Covid-19 on aircraft demand.”

“With Boeing likely to burn over $5 billion of cash this year and a less certain path to recovery, given the damage that Covid-19 will do to operators, we think a dividend cut is on the table.”

“The market may be pricing in an annual dividend cut to less than $5/share, which would free up about $2 billion of annual cash flow.”

Downgraded to neutral from overweight, price target cut to $210 from $370.

Bernstein, Douglas Harned

“We do not see these issues as justifying a $20 billion drop in market value.”

“Boeing had drawn $7.5 billion of the loan and is simply moving the rest to the balance sheet at a time of higher uncertainty – but, not a material change to the company’s financial position.”

“While Covid-19 poses risks, Thursday’s market reaction to the debt announcement and February delivery results appeared to be a substantial overreaction.”

Canaccord Genuity, Ken Herbert

“While the ~18% drop in the stock yesterday does represent an over-reaction, in our view, it is clear that the outlook for Boeing has materially stepped down in the past few weeks.”

“We do not believe Boeing is facing a liquidity crisis. However, we estimate that cash pressure on Boeing has accelerated due to the coronavirus.”

“We do not believe Boeing will lower its dividend.”

Remains at hold, price target to $225 from $340.

To contact the reporter on this story: Esha Dey in New York at edey@bloomberg.net

To contact the editors responsible for this story: Brad Olesen at bolesen3@bloomberg.net, Cristin Flanagan, Jennifer Bissell-Linsk

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