Aerospace stock Boeing (BA) looks like it is playing hardball with the union in St. Louis. Between plans to hire new workers to bypass the union altogether, and a new plan to move work on the Super Hornet, it looks like the International Association of Machinists and Aerospace Workers (IAM) union is getting every prop knocked out from under it. Investors seemed oddly displeased by this, sending Boeing shares down fractionally in Wednesday afternoon’s trading.
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Boeing had a project in the works to upgrade the F/A-18 Super Hornet at its St. Louis County plant. But Boeing is instead moving that project out of the area, and is currently looking at sites in Texas and Florida to take over the work instead. Boeing refers to this work as “service life modification,” and is already being done at Florida and Texas sites, as well as St. Louis and at the Fleet Readiness Center Southwest in San Diego.
Interestingly, Boeing did not specifically cite the strike as a reason, as evidenced by a statement from Boeing’s vice president and general manager of the Air Dominance operation Dan Gillian. The statement noted, “Our expansion plans across the St. Louis site triggered the execution of a multi-year strategic plan, requiring the relocation of some work.”
“Not a Meaningful Deterrent”
Meanwhile, back in Washington, Senator Richard Blumenthal is calling for some answers about how the Federal Aviation Administration (FAA) calculated a fine of $3.1 million on Boeing over the Alaska Airlines (ALK) incident. Blumenthal noted, “For Boeing, such fines are easily absorbed as the cost of doing business, not a meaningful deterrent to dangerous behavior. Unless penalties rise to the level that forces the company to invest in real safety reforms, the risks to the flying public will persist.”
Here, Blumenthal seems to ignore the production cap that the FAA put on Boeing, under which it has been operating for approaching two full years now. This would not only ameliorate the “..risks to the flying public” he describes, but also serve as a deterrent in and of itself for the real harm it did to Boeing’s bottom line in lost business. It may not be as much deterrent as some would like, but it has certainly served to turn things around to some extent.
Is Boeing a Good Stock to Buy Right Now?
Turning to Wall Street, analysts have a Strong Buy consensus rating on BA stock based on 17 Buys and two Holds assigned in the past three months, as indicated by the graphic below. After a 42.12% rally in its share price over the past year, the average BA price target of $259.71 per share implies 20.82% upside potential.
