Shares of Dow Jones aircraft maker Boeing fell Tuesday as news regarding 737 Max deliveries in China and an analyst downgrade weighed on Boeing stock.
China Southern Airlines will reportedly increase the safety inspection regimen for new Boeing 737 Max aircraft, delivery of which the airline expects as early as this month, the Wall Street Journal reported. China Southern's jets on order from Boeing are reportedly not the same version of the 737 Max aircraft as the 737 Max 9 model that has been grounded, pending safety inspections following a fuselage panel blowout on an Alaskan Airlines jet on Jan. 5.
The move would ostensibly hold up entry to service for the unspecified number of jets due for China this month. Chinese authorities have also required safety inspections for all 737 Max aircraft operating in China. The Wall Street Journal reports China-based airlines currently own no 737 Max 9s. Still, it is unclear how long the new inspection protocols will take and how much time it will add to deliveries.
737-9 Max Emergency Landing
The Alaska Air incident ended with a safe landing and only minor injuries among passengers after the cabin of the jet decompressed in flight. The panel torn away from the aircraft was reportedly a plug panel, used in 737 Max 9s to cover what, in smaller versions of the aircraft, is an emergency exit door.
The Federal Aviation Administration issued an order on Jan. 6 requiring safety inspections of the plug panels in all 737 Max 9 aircraft in the U.S. Boeing on Monday sent a staff memo detailing additional inspections of its 737 production line, the Wall Street Journal said. The company also sent staff to inspect manufacturing of the door panels and other work at Spirit Aerosytems, which supplies the fuselage components for the 737 Max 9s.
On Jan. 8, inspections by United Airlines reported finding loose bolts and other parts during its 737-9 Max door plug review.
China is a critical market for Boeing, expected to account for 20% of global aircraft demand in the next two decades, according to Boeing forecasts. The new 737 Max models are key to ramping Boeing's business back up in the country, following the global grounding of the aircraft model following fatal crashes in Indonesia and Ethiopia in 2018 and 2019.
Boeing Stock
Wells Fargo downgraded Boeing stock to equal weight from overweight early Tuesday after the China news and Monday's company update. The FAA inspection audit opens a "whole new can of worms" for Boeing and "significantly" increases the risk of delivery impacts, the firm wrote in a research note. Wells Fargo slashed its price target on Boeing to $225 from $280.
Boeing stock fell 7.9% Tuesday, leading losses among Dow Jones industrial stocks on the news. Boeing tumbled nearly 12.6% last week following the Alaska Airlines incident and FAA inspection process.
Last week's dive triggered the automatic sell rule, as Boeing dive more than 8% below a cup-base buy point following a December breakout.
Supplier Spirit dropped 4.4% Tuesday after shares declined 3.5% in premarket trade.
You can follow Harrison Miller for more stock news and updates on X/Twitter @IBD_Harrison
