It isn’t what investors want to hear.
Boeing
(ticker: BA) has halted deliveries of its 737 MAX jet after the discovery of a parts compliance problem from a supplier.
Boeing
stock was down 5.4% in premarket trading Friday at $202. Shares gained 0.6% in regular trading on Thursday while the
S&P 500
and
Dow Jones Industrial Average
rose 1.3% and 1.1%, respectively.
“A supplier has notified us that a nonstandard manufacturing process was used during the installation of two fittings in the aft fuselage section of certain [737 MAX] airplanes, creating the potential for a nonconformance to required specifications,” said a Boeing spokeswoman in an emailed statement. “This is not an immediate safety of flight issue and the in-service fleet can continue operating safely. However, the issue will likely affect a significant number of undelivered 737 MAX airplanes, both in production and in storage.”
Boeing went on to add that it has notified the Federal Aviation Administration and it is working to inspect and replace nonconforming parts.
The supplier is likely
Spirit AeroSystems
(SPR). Shares of Spirit Aerosystems were down 11.5% in premarket trading at $31.50. The company didn’t immediately return a request for comment about MAX parts.
Investors are particularly attuned to MAX issues because the jet was grounded worldwide between March 2019 and November 2020 following two deadly crashes inside of five months.
Boeing stock was north of $440 a share before the second deadly MAX crash, and before Covid-19. It closed on Thursday at $213.59.
The MAX has been flying safely for years since its reintroduction to commercial fleets, but ramping up production of the MAX is a significant issue for the stock in 2023. Wall Street expects Boeing to deliver about 570 jets in 2023, up from 480 in 2022. Boeing delivered 806 jets in 2018, the year before the MAX issue and a couple of years before Covid-19 decimated demand for air travel.
Delivery pauses don’t help with investor confidence regarding the 570 delivery mark.
The 570 figure is a Wall Street projection. Boeing has guided investors to 400 to 450 MAX deliveries for 2023. That will require getting the MAX production rate from about 31 a month to 35-plus a month. Wolfe Research analyst Myles Walton wrote Friday he is cautiously optimistic that can still be hit.
Boeing investors will hear more about MAX production and delays when the company reports first-quarter numbers on April 26. Boeing delivered 130 jets in the first quarter, better than the 120 Wall Street was looking for.
The first quarter of the year is seasonally weak for Boeing deliveries.
Write to Al Root at allen.root@dowjones.com
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