Boeing cannot seem to find the cure. Ever since the controversy began surrounding their 737 MAX, it has been a string of bad news.
That bad news continued this week when Boeing announced its earnings for the quarter. The numbers were disastrous, of course. But that was to be expected following two quarters of controversy. What really stung the aerospace giant was the headlines. Here are the two biggest.
Cancelled Contract Bid
Boeing hurt itself further coming out of their earnings announcement by cancelling a bad for a government contract.
Boeing had been one of two bidders, along with competitor Northrop Grumman, for an Air Force contract to replace the Minuteman III intercontinental ballistic missile (ICBM) program. On Thursday, the company announced its withdrawal from that bid, leaving its competitor as the only company in the race.
“After numerous attempts to resolve concerns within the procurement process, Boeing has informed the Air Force that it will not bid Ground Based Strategic Deterrent (GBSD) Engineering and Manufacturing Development (EMD) under the current acquisition approach,” Boeing said in a statement. “We’ve evaluated these issues extensively, and determined that the current acquisition approach does not provide a level playing field for fair competition.”
Whether or not the acquisition approach was fair, the news is no help to Boeing. Northrup Grumman stock is up over 8.8 percent since the open on Wednesday. In the same time period, shares of Boeing are down 6.98 percent, hitting a six-week low.
That drop might have been forestalled had there been better news on the 737 MAX front. Unfortunately, that news may have been worse. The company was forced to stop a charge of nearly $5 billion related to its controversial plane, and there is no word on when the groundings will cease.
More bad news came for the MAX from outside the company. Southwest announced that it wouldn’t fly the plane until at least 2020. American Airlines announced that grounding the plane cost the company roughly $400 million.
Meanwhile, airlines like Jet Blue and Allegiant, that do not rely in any way on the 737 MAX, are seeing increased investment.
Speaking realistically, Boeing will eventually pull out of this nose dive. Once they get the 737 MAX operational, they will begin to win again. But for the time being, this is a stock to avoid if at all possible. There is too much controversy, chaos, and confusion surrounding Boeing to tie yourself to it now.