New 787 delay already factored into Boeing stock

By Reuters
Posted Nov. 18, 2010 at 3:08 p.m.

A seventh delay for the long-awaited Boeing Co 787 Dreamliner is all but assured, and the negative sentiment is priced into shares, analysts said Thursday.

Shares of Boeing, a component of the Dow Jones Industrial Average, were up 3.4 percent Thursday — partly erasing losses since an electrical fire last week forced it to halt Dreamliner test flights — but the stock was still down more than 6 percent since the Nov. 9 incident.

“I certainly think there’s a very high probability there will be a seventh delay announced in the first delivery,” said Kenneth Herbert, an analyst at Wedbush Securities. “People just really think there has been a lot of negative news priced into the stock.”

He said he thinks Boeing, which competes with Airbus for commercial plane orders, may delay first delivery of the light-weight, carbon-composite plane to June or July from the current target of mid-first quarter of 2011.

“Right now nobody has a good idea,” Herbert said.

Alex Hamilton, managing director of EarlyBirdCapital, said the sell-off in Boeing shares provides a buying opportunity because so many investors already are braced for a delay.

“A lot of this is priced in,” said Alex Hamilton, managing director of EarlyBirdCapital. “There’s no certainty as to when flight testing is going to resume. Wall Street hates uncertainty.”

Boeing says that the fire is being investigated and that it remains unclear whether there will be another delay to the program, which already is nearly three years behind schedule.

“The investigation is ongoing,” said Boeing spokeswoman Loretta Gunter. “Until it is complete, we won’t have a good understanding of schedule impact.”

Speculation is rampant in the aviation industry that another delay is in the cards. Guesses range from a few months to a few years.

Steven Udvar-Hazy, chief executive of Air Lease Corp., told Bloomberg Thursday that the first delivery will “definitely” be postponed.

Air Lease has no 787 orders. But International Lease Finance Corp., the airplane leasing company Hazy formerly ran, has orders for 74 787s.

Also on Thursday, Boeing said it took a new order for one 777 from Latin America’s LAN Airlines SA in the week that ended Nov. 16.

In a weekly report, Boeing also identified Brazil’s GOL Airlines as the buyer in a previous order for 20 737s.

The 777 order is potentially worth $271.8 million at list prices. Boeing has logged a net 484 commercial aircraft orders this year compared with 263 in all of 2009.

Boeing shares rose $2.10, or 3.4 percent, to close at $64.60 on the New York Stock Exchange  Thursday. They closed at $69.25 on Nov. 9, before word of the test flight fire.

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