Yahoo Finance Why Boeing (BA) Stock is Plummeting Today
Boeing BA stock is taking a beating today. Shares are down about 8% since the opening bell, but Boeing hasn’t been fairing too well this year in general as shares are down about 28% year-to-date. After a poor earnings report on the 27th of January, there hasn’t much positivity surrounding BA stock at all.
Job Cuts
Today, it was announced that the company will be cutting jobs in its commercial airplane segment. Compared to the fourth quarter last year, operating margins have decreased from 9.3% to 3.5%.
After the earnings, it became clear that something had to be done in order to bring margins back to a reasonable level. It is not clear how many jobs will be cut, but Boeing CEO Ray Conner said “we will start reducing employment levels beginning with executives and managers first”.
The commercial airplane segment is Boeing’s largest one, raking in 68% of the company’s revenue in the fourth quarter. The job cuts could increase margins, but lower the amount of revenues which the company brings in. Boeing has backlogged airplane orders going back seven years.
Keep in mind that the aviation industry is in high demand, so it will be interesting to see if Boeing manages to keep up with the demand going forward. Right now, main rival Airbus is enjoying greater market share in this segment than Boeing.
SEC Probe
According to Bloomberg, the SEC is investigating Boeing because of accounting practices on the 787 Dreamliner as well as the 747 jumbo jetliners. The investigation is being conducted to see whether or not Boeing accounted for costs and expected sales correctly.
The SEC is also digging into the company’s long term profitability projections on those two jet liners. They are reviewing the company’s use of program accounting, which allows Boeing to accelerate the large upfront costs of making a plane over multiple years.
The practice is legal, but Boeing is being probed because of its potential abuse in using program accounting. Expected costs and sales are estimates, but they have to be updated when it is clear that the accounting program underestimates costs.
The Zacks Rank is a truly marvelous trading tool. Our ranking system has beaten the S&P 500, yielding an average return of 26% per year for the last 28 years! Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
BOEING CO (BA): Free Stock Analysis Report
To read this article on Zacks.com click here.
