Boeing's Stock Drops After Analyst Gives It a Rare Underperform Rating
Boeing Co.'s stock fell 0.5% in premarket trade Thursday, after RBC Capital started coverage of the aerospace giant with a rare underperform rating, citing concerns over the average age of the company's production platforms and that the commercial areo cycle may have peaked. Analyst Matthew McConnell's stock price target of $136 is 15% below Wednesday's closing price of $159.40. Only 103, or 6.5%, of the 1,594 companies covered by RBC have underperform ratings. "We believe new commercial platforms create margin pressure due to higher unit production costs in initial accounting blocks, engineering and supply chain risks when ramping up new programs, and slowing production and pricing pressure on high margin legacy platforms in advance of new launches, among other factors," McConnell wrote in a note to clients. He also said "it is clear" that the strongest part of the commercial aero cycle has passed, given declining commercial orders, headcount reductions and cuts to widebody production rates. Boeing's stock has run up 20% over the past three months through Wednesday, while the Dow Jones Industrial Average has gained 10%.
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