Since mid-2019, General Electric (GE) has been explosive.
To date, GE shares have run from $7.74 to a high of $12.05 with CEO Larry Culp telling investors better days are ahead.
Analysts are just as bullish.
UBS for example upgraded the GE stock to a buy rating with a price target of $14 a share, calling 2020 an “inflection year” thanks to debt repayment and better free cash flow.
However, Boeing’s (BA) 737 MAX issues could do some damage.
Boeing just announced it doesn’t expect for the 737 to fly commercially again until mid-2020.
“Until recently, Boeing had often suggested the fixes were almost ready to be submitted to regulators and approval was imminent,” reports NPR. “But in December, FAA Administrator Stephen Dickson pushed back against Boeing’s then-CEO Dennis Muilenburg for suggesting repeatedly that the Max would be recertified before the end of the year, saying the regulatory agency would not be pressured into granting quick approval.”
Nowadays, the company is telling airlines and its suppliers that it doesn’t expect regulators to sign off on the 737 until the middle of 2020 — months later than anticipated.
Plus, the Federal Aviation Administration hasn’t said when it will clear the plane for flight.
“The agency is following a thorough, deliberate process to verify that all proposed modifications to the Boeing 737 MAX meet the highest certification standards,” the FAA said. “We continue to work with other safety regulators to review Boeing’s work as the company conducts the required safety assessments and addresses all issues that arise during testing.”
With that, Bank of America believes the news could threaten Boeing’s supply chain, which includes General Electric.
At the moment, the 737 MAX problem is cost GE about $400 million in cash burn every quarter, as highlighted by Barron’s. The good news is that “cash burn due to the MAX should reverse when the plane flies again, as global aviation stakeholders continue to expect. Still, Boeing’s growing woes represent a watch item for investors.”
