Boeing Gets Union Update as We Eye Adding More Shares
We continue to project a resolution between the two side as management focuses on increasing deliveries.
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On Monday, we shared that we were waiting to hear about developments between Boeing (BA) and union representatives for the Society of Professional Engineering Employees in Aerospace (SPEEA). Word from the union is that the two will resume contract talks on September 8. Granted, that is not much of a development, but now we have an established timeline to track that could remove this particular overhang from BA shares. Indications are that the SPEEA members are looking for higher general wage increases from Boeing.
Our view remains that there will be a meeting of the minds between the two sides. As we pointed out when we first discussed this development, direct factory labor as a percentage of overall costs to build an aircraft is in the low single-digits. Boeing’s multi-year backlog and pricing dynamics suggest Boeing has room to maneuver in the negotiations. We think that increase in costs will be more than outweighed by Boeing’s focus on increasing delivery and production levels that should bring greater operating leverage, cash flow and EPS.
As we shared in Monday’s August Monthly Roundup, we continue to eye the $205 to $210 level for a potential BA add, but we will also be mindful of market conditions. We are also watching the MACD indicator for BA shares closely, looking for that curve to flatten further before making a next move.
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At the time of publication, TheStreet Pro Portfolio was long BA shares.
