Boeing Stock Would Benefit from a Breakup, Specialist Says

The Boeing Company (NYSE:BA) has faced numerous challenges in recent years, including production issues, regulatory setbacks, and a costly strike. These issues have led some industry experts to suggest that a breakup of the company's divisions could be beneficial for its long-term prospects. One such specialist, Scott Mikus of Melius Research, believes that a separation of Boeing's commercial aircraft, defense, and services businesses could help the company focus on its core competencies and improve overall performance.



Mikus argues that Boeing's current structure, with its three-legged stool approach, is not well-suited for the modern aerospace industry. The company's commercial aircraft division has struggled with production issues and a monthlong strike, while the defense division has faced cost overruns and potential charges. The services division, however, has remained profitable and services all of Boeing's products, as well as some of its competitors' products. By separating these divisions, each entity could focus on its core competencies and improve overall performance.

A breakup could also lead to reduced overhead costs and better resource allocation. Each division could have its own management structure, reducing the need for a large, centralized management team. This could result in cost savings and improved profitability. Additionally, separate divisions could be valued independently, potentially leading to a higher overall valuation for Boeing. Investors might be more willing to pay a premium for a pure-play in a specific industry (e.g., commercial aircraft manufacturing) than for a diversified company with multiple divisions.



However, a breakup also comes with risks. There would be significant costs associated with the breakup, including legal and accounting fees, as well as potential disruptions to operations. Additionally, the divisions might lose some of the synergies that come from being part of a larger, diversified company. A breakup could also raise regulatory and antitrust concerns, potentially leading to delays or even obstacles to the process.

In conclusion, a breakup of Boeing's divisions could potentially lead to improved financial performance and a higher stock price, but it would also come with significant challenges and risks. It's essential to weigh these factors carefully before making any decisions. As Boeing continues to face challenges in the commercial aircraft market, a breakup could be a viable option to help the company refocus and improve its long-term prospects. However, investors should be aware of the potential risks and costs associated with such a move.