Boeing Stock Is Slipping. A Share Offering Is Coming, Says a Report.
By Al
Root
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Oct 01, 2024, 8:34 am EDT
’s balance sheet is a mess and the aerospace company is
likely to raise new equity capital to help repair it. When
and how much are the questions?
It could be sooner than later. Tuesday, Bloomberg reported
Boeing was weighing a $10 billion equity raise. The company
didn’t immediately respond to a request for comment.
Boeing stock was down 0.8% in premarket trading at $150.79,
while S&P 500
and Dow Jones Industrial Average
futures were down 0.1% and 0.2%, respectively.
The stock might not be down more because investors are well
aware of the company’s financial situation. Amid 737 MAX design problems, the
pandemic, and production quality problems, Boeing has amassed some $45 billion in
debt, less cash balances, up from about $5 billion at the end of 2018.
The debt balance is almost six times estimated 2025 earnings
before interest, taxes, depreciation, and amortization, or Ebitda, and about
four times estimated 2026 Ebitda. That’s too high. Investors typically take
note when debt-to-Ebitda at an industrial company exceeds three times.
It would take roughly $15 billion in new equity—used to pay
down debt—to return the 2026 debt-to-Ebitda ratio below three times. Some
equity raise in the future is likely. Wells Fargo analyst Matthew Akers has suggested Boeing will raise about $30
billion in equity over time. Timing, however, is up in the air. Boeing, of
course, would like to sell stock when the stock price is higher.
Coming into Tuesday trading, Boeing stock was down about 42%
year to date, and down about 7% since a labor strike began on Sept. 13.
Akers rates Boeing stock at Sell. Tuesday, his price target
dropped to $110 from $119. He cut his third-quarter estimates due to the
strike. “Further out, we assume Boeing doesn’t hit 38 per month on 737 [MAX
production] until second-half 2025 given it is now slowing suppliers,” wrote
the analyst.
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