Boeing's stock drops as workers strike, and history suggests it could fall more

By Tomi Kilgore

During the last strike in 2008, the stock continued to trend down until a deal was reached

Shares of Boeing Co. were slumping Friday, after the aerospace giant's machinists union rejected a tentative deal and voted to go on strike.

And based on how the stock performed during the last strike, Boeing investors should probably brace for even further declines until another deal is reached.

While Boeing suppliers are also at risk as the strike would impact aircraft deliveries, shares of suppliers were so far trading mostly higher.

See: Boeing factory workers go on strike after rejecting contract offer

Boeing's stock (BA) slid 2.7% in morning trading, but pared earlier losses of as much as 5.1% seen in the premarket session.

The stock was the Dow Jones Industrial Average's DJIA biggest decliner. The $4.37 price decline was reducing the Dow's price by about 29 points, while the Dow rallied 159 points, or 0.4%.

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.

And based on this reaction, and what happened to the stock during the last strike in 2008, Stallard believes the stock "could remain weak until a deal is reached."

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," Stallard wrote in a recent note to clients.

That means, the strike could have an even bigger impact on Boeing's suppliers.

Shares of supplier Spirit AeroSystems Holdings Inc. (SPR) fell 1.5% in morning trading Friday. That might be more a result of Boeing's stock's weakness, since Spirit had recently agreed to be acquired by Boeing.

Among other suppliers, shares of GE Aerospace (GE) rose 1%, Honeywell International Inc.'s stock (HON) ticked up 0.1%, RTX Corp. shares (RTX) eased 0.1%, Howmet Aerospace Inc.'s stock (HWM) edged up 0.2% and shares of Parker-Hannifin Corp. (PH) tacked on 0.6%.

-Tomi Kilgore

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09-13-24 1015ET

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