Boeing Stock Surges as 737 MAX Production Resumes

Boeing's stock surged nearly 6% as production of its best-selling 737 MAX jets resumed following a turbulent seven-week strike. The restart, a month after the strike ended, is a critical step for the heavily indebted aerospace giant to meet a backlog of approximately 4,200 orders for the 737 MAX amid rising global air travel demand. Analysts at Jefferies predict Boeing will make an average of 29 737 MAX planes per month in 2025, up from the current FAA cap of 38 per month. This increased production is expected to boost Boeing's revenue and profit margins in 2025, as the company gets most of its revenue from customer deliveries. However, challenges remain, including heightened regulatory scrutiny and the need to regain operational stability and confidence in its manufacturing processes.



The strike, which started at 3:01 a.m. Eastern, came even after union leaders had recommended member approve the tentative deal, which was reached early Sunday. Since that deal was reached, the stock had been up 3.3% on the week through Thursday, after it had tumbled 12.4% over the past three weeks. But as Vertical Research Partners analyst Robert Stallard noted, with all that has been going on with Boeing, such as continued concerns over 737 MAX production, worries about the need to raise a lot of cash by selling equity and even troubles with the Starliner spacecraft, it's uncertain whether the stock had already been pricing in a work stoppage. But given the stock's gains leading up to the vote, and Friday's selloff after the strike took effect, suggests investors had started to take a strike off the table.



One thing to keep in mind, is that the earlier strike took effect as the broader market was suffering from the 2008 financial crisis. Between the time the strike took effect and the tentative deal was reached, the stock had tumbled 33%, but the S&P 500 index SPX fell 32% over the same time. Stallard said there could be a bright side to the strike. He believes that given the current issues and uncertainties with 737 MAX deliveries, the program is likely burdened with "considerable excess inventory" of materials and the strike will have an "obvious" impact on deliveries. The strike could be a good opportunity for Boeing to reset, and either pause supplier deliveries or take them down to a more realistic level.

In conclusion, the resumed production of Boeing's 737 MAX jets is a positive development for the company, as it looks to meet growing demand and boost its revenue and profit margins. However, challenges remain, and investors should closely monitor the company's progress in addressing these issues. The strike has had an impact on Boeing's stock performance and its relationships with suppliers, but it also presents an opportunity for the company to reset and manage its inventory and deliveries more effectively.