Boeing (BA, Financial) continues its downward trend, hitting new 23-month lows due to several unfavorable developments. The company announced that further negotiations with its machinists union were not feasible, retracting its offer. This decision might have already been anticipated, as the union did not favorably receive Boeing's increased offer earlier this week. The market seems to be accounting for the ongoing strike, which began last month after the union overwhelmingly rejected a four-year contract, potentially extending through 2024.
Today's price drop is likely influenced by additional news that emerged yesterday after the market closed.
- The S&P placed Boeing's ratings, including its BBB- issuer credit rating, on CreditWatch Negative, primarily due to the strike. As the strike enters its fourth week, Boeing faces growing financial risks. S&P projects around $10 billion in cash outflow this year due to the strike, necessitating Boeing to secure funding to maintain its cash balance and meet debt obligations.
- By Q2, Boeing reported approximately $7.2 billion in net cash outflow, attributed to lower commercial deliveries and poor working capital timing. Boeing's total debt rose to $57.9 billion after issuing $10 billion in new debt in May.
- This situation led to a report suggesting Boeing is exploring ways to raise cash. Given S&P's $10 billion cash outflow estimate, a source indicated that Boeing might aim to raise this exact amount.
- The method Boeing will choose remains uncertain. However, options like stock dilution through common stock offerings, convertible bonds, preferred stock offerings, or large stock sales could impact the current share price.
Boeing continues to face numerous challenges this year, including critical headlines about manufacturing issues and failures in its Starliner program. The company is currently dealing with a nearly month-long strike, paused negotiations, and a looming cash shortfall, potentially necessitating a significant cash raise soon. Amid these challenges, positive developments are scarce. Boeing recently appointed Kelly Ortberg as CEO, which might lead to significant changes. However, it may take some time before the stock recovers from the prevailing bearish sentiment.
