Boeing Stock to Suffer More After the Ethiopian Crash

Boeing Stock to Suffer More After the Ethiopian Crash

After an impressive bull run that started on December 26^th, which led the Boeing stock price to new record highs located around $445, the Ethiopian 737 MAX crash had been a huge drag on the company.

Boeing share trading started to head south, and the stock plunged from the all-time high to $362 in less than two weeks. The debate went on for weeks on who should be held accountable for the tragedy and recently the cause seems to have been found and a fix will come soon.

The MCAS anti-stall system

Recently, the US Federal Aviation Administration (FAA) decided to form an action committee with NASA and international civil aviation authorities in order to grant the certification for a fix on the MCAS anti-stall system Boeing had developed for the 737 MAX.

It seems like the investigation on the matter revealed that’s the reason why both the Ethiopian Airlines and the Lion Air crash in Indonesia took place. Despite the fix, it is still uncertain whether Boeing share trading will go up again.

During a conference in Dallas, Texas, Dennis Mullenberg, the current Boeing CEO, gave assurances that the changes pending will make the 737 MAX “even safer by preventing erroneous angle of attack sensor reading from triggering the MCAS”.

Source: pixabay.com

Shares expected to bleed in the near term

Despite his upbeat speech on the matter, probably aimed at reducing the panic that had arisen after the crash, the prospects for the Boeing shares are not too good. With all 737 MAX planes on the ground until the update will be implemented, and with some new orders canceled, the financial prospects for the company could be severely damaged.

The company will release its earnings for the first quarter of 2019 on April 24^th, and despite an expected EPS of $3.59, the focus will be on the projected returns for the following quarters. Investors will watch for any negative clue about the impact of the two plane crashes that damaged the trust in the company.

According to a report by Bloomberg Intelligence, the estimated costs of lawsuits and reimbursements could go as high as $1.9 billion in the next six months. Weakening earnings could trigger stock downgrades and further stock selling as a result. The expectations are low at the time, but if the company will manage to get out of this mess will smaller damages, the outlook for the Boeing stock will be more positive.