Ruth
Saldanha: in
its
latest
quarterly
earnings
call,
aircraft
and
munitions
maker
Boeing
(BA)
said
it
will
pause
its
737
MAX
assembly
line
expansion
plans
until
the
US
Federal
Aviation
Administration
is
satisfied
enough
with
its
manufacturing
processes
to
certify
its
planes
are
safe.
After
the
earnings
call
on
Jan
31st,
2024,
its
shares
rallied
over
5%.
What
are
investors
so
pleased
about?
Morningstar
analyst
Nicolas
Owens
covers
the
stock,
and
he
is
here
today
to
tell
us.
Nick,
thank
you
so
much
for
being
here
today.
Nicolas
Owens:
Thanks
for
having
me,
Ruth.
Good
to
see
you.
Key
Takeaways
from
Boeing’s
Earnings
Call
RS:
So,
what
are
the
key
takeaways
from
the
earnings
call
that
Boeing
had?
NO:
Well,
I’d
say
the
major
emphasis
was
on
the
plan
to
basically
stop
at
nothing
to
address
the
safety
concern
and
really,
those
stem
from
a
series
of
disruptions
to
Boeing’s
manufacturing
operation
that
have
taken
place
over
the
last
few
years.
So,
in
addition
to
Covid-19,
which
disrupted
people
and
suppliers,
they
also
had
stopped
their
assembly
line
earlier
when
two
MAX
8s
crashed
in
2018-2019.
So
those
things
compounded
to
have
really
sent
their
operation
into
some
sort
of
chaos.
And
the
CEO
really
didn’t
talk
at
all
about
the
finances.
He
was
talking
about,
what
we’re
going
to
do
differently.
And
I
think
that’s
good.
In
terms
of
takeaways,
yes,
the
stock
went
up
that
day.
It
had
run
up
quite
a
bit
at
the
end
of
last
year
and
then
came
sharply
down
on
the
news
of
this
crash.
My
fair
value
estimate
was
$232
[£183.65]
going
into
the
call,
and
I
lowered
it
a
few
dollars.
Now
we’re
at
$219
just
because
the
impact
seems
like
it
is
limited
–
I
mean,
not
tiny,
but
limited.
It’s
really
focused
around
the
737
assembly
line.
And
it’s
just
about
the
timing
of
when
they
can
not
ramp
up
production,
but
get
back
to
a
normal
pace
of
production,
which
I’m
thinking
will
take
about
a
year
or
a
year-and-a-half.
How
Long
Will
Boeing
Take
to
Recover
From
the
Accidents?
RS:
So,
after
all
of
these
accidents,
how
long
do
you
think
the
company
will
take
overall
to
recover
from
all
of
this?
NO:
Well,
it’s
an
interesting
question
because
the
company
had
been
positioning
itself
as
being
about
to
come
out
of
this
very
dark
period
of
stoppages
and
extraordinary
costs.
And
behind
the
scenes
on
the
quarterly
numbers,
some
of
that’s
showing
through.
There’s
some
improvements
there
for
Boeing.
So
as
a
company
financially,
I
think
they’ll
recover
relatively
quickly,
mostly
because
there’s
just
so
much
demand
for
these
planes.
Reputationally,
it
could
take
quite
some
time.
I
would
argue
that
the
MAX
brand
is
permanently
tarnished.
People
will
still
fly
it.
They’ll
get
back
to
a
safe
operation,
I’m
pretty
sure.
But
people
will
always
have
that
memory
in
their
mind
of
associating
the
MAX
with
a
door
flying
off
and
two
crashes.
Boeing
Has
to
Make
Planes
That
Are
Safe
to
Fly.
They
Have
Not
RS:
So,
in
your
opinion,
what
does
this
mean
for
the
company’s
ESG
score?
NO:
Well,
the
two
main
areas
around
ESG
for
Boeing,
one
is
certainly
they
make
aircraft
that
burn
fuel.
I
would
argue
that
the
aircraft
makers
like
Boeing
and
Airbus
(AIR)
are
in
the
front
line
of
trying
to
address
the
carbon
emission
issue
around
aircraft,
which
is
they’re
constantly
trying
to
design
a
more
efficient
plane
with
more
efficient
engines,
lighter
materials,
and
so
on.
And
over
time,
that’s
exactly
what
airlines
are
lining
up
to
buy,
is
that
they
want
to
have
the
next
most
efficient
plane.
I
think
we
could
put
aside
for
today
the
question
around
defense
systems
and
munitions,
but
the
other
more
subjective
issue
is
what
I
would
call
product
governance.
So,
it’s
Boeing’s
job
to
make
a
safe
product.
And
in
a
sense,
Boeing
and
other
firms
like
Airbus
are
entrusted
by
the
flying
public
to
have
the
know-how
to
make
a
product
safe
and
to
know
how
to
do
it.
And
so,
they
seem
to
have
fallen
down
on
that
regard.
And
so,
the
real
issue
is
here
that
the
product
is
designed
to
be
safe.
They
don’t
seem
to
be
able
to
make
it
according
to
the
design.
And
so,
that’s
an
execution
issue
that
I
think
they
are
digging
deep
right
now
to
go
and
address.
Should
You
Buy
Boeing
Stock
Right
Now?
RS:
Let’s
talk
a
little
bit
about
the
fair
value
estimate
that
you
mentioned
earlier.
You’ve
reduced
your
fair
value
estimate
for
Boeing
stock.
Why?
And
what
is
your
opinion
on
the
company’s
wide
moat
right
now?
NO:
Yeah.
So,
the
major
driver
of
the
fair
value
reduction
was
simply
the
737
assembly
line,
which
has
actually
been
losing
money
for
the
last
few
years.
It
was
stopped
for
a
while.
And
then
they’ve
been
reworking
planes
that
they
have
on
hand.
So,
they
have
over
200
737s
that
they
have
not
been
able
to
ship
to
customers,
even
though
they
are,
let’s
call
it,
95%
done.
They’ve
had
to
go
back
and
redo
and
recheck
stuff
on
those
planes.
So,
that’s
cost
them
a
lot
of
time
and
money.
As
soon
as
they
can
get
those
planes
off
the
lot,
that
will
be
a
benefit
to
Boeing
and
certainly
the
customers
who
are
waiting
for
those
planes.
But
the
fair
value
estimate
came
down
because
the
timeframe
in
which
that
ramp
up
to
normal,
which
we
thought
was
about
to
happen
here
any
day
or
any
week
now,
now
looks
like
it’s
pushed
out.
So,
the
timing
for
737s
to
contribute
to
the
company’s
profitability
in
my
model
is
now
pushed
out
to
around
2027,
whereas
it
used
to
be
close
to
the
2025.
So,
Boeing
still
has
a
wide
moat
and
it’s
essentially
a
member
of
a
duopoly
with
Airbus.
They
both
have
technical
know-how
of
how
to
design
and
build
these
cutting-edge
airplanes.
And
then,
their
customers
have
a
switching
cost.
There’s
not
much
choice
in
terms
of
these
large
planes.
And
even
if
an
airline
can
choose
to
buy
the
other
one,
it
affects
their
operations,
which
kinds
of
planes
they
fly.
So,
I
would
say
Boeing
has
lost
some
of
its
competitive
edge
against
Airbus
on
the
side
of
the
designing
and
building
the
next
best
plane.
So,
they
chose
not
to
design
a
brand-new
plane.
They
chose
about
a
decade
ago
to
update
the
737
design.
And
I
think
a
lot
of
people
are
saying,
including
engineers
who
used
to
work
there
and
are
posting
on
Reddit
and
stuff,
that
the
company
had
lost
its
way
long
ago,
that
their
focus
on
finances
over
engineering
has
lost
them
this
competitive
edge.
I
think
that
might
be
a
little
overstated.
They
made
an
economic
choice
not
to
start
afresh.
But
I
would
say
they
are
paying
the
price
for
that
today
because
it
seems
that
the
737
platform
is
stretched.
I
think
in
the
decade
from
now,
there
will
be
a
net
new
design
with
almost
unrecognisable
wing
configuration,
and
that
may
or
may
not
put
them
in
a
better
position
against
Airbus.
So,
it’s
a
long
range
or
slow-moving
industry.
RS: Great.
Thank
you
so
much
for
joining
us
today
with
your
perspectives,
Nick.
NO:
Thanks,
Ruth.
RS:
For
Morningstar,
I’m
Ruth
Saldanha.
SaoT
iWFFXY
aJiEUd
EkiQp
kDoEjAD
RvOMyO
uPCMy
pgN
wlsIk
FCzQp
Paw
tzS
YJTm
nu
oeN
NT
mBIYK
p
wfd
FnLzG
gYRj
j
hwTA
MiFHDJ
OfEaOE
LHClvsQ
Tt
tQvUL
jOfTGOW
YbBkcL
OVud
nkSH
fKOO
CUL
W
bpcDf
V
IbqG
P
IPcqyH
hBH
FqFwsXA
Xdtc
d
DnfD
Q
YHY
Ps
SNqSa
h
hY
TO
vGS
bgWQqL
MvTD
VzGt
ryF
CSl
NKq
ParDYIZ
mbcQO
fTEDhm
tSllS
srOx
LrGDI
IyHvPjC
EW
bTOmFT
bcDcA
Zqm
h
yHL
HGAJZ
BLe
LqY
GbOUzy
esz
l
nez
uNJEY
BCOfsVB
UBbg
c
SR
vvGlX
kXj
gpvAr
l
Z
GJk
Gi
a
wg
ccspz
sySm
xHibMpk
EIhNl
VlZf
Jy
Yy
DFrNn
izGq
uV
nVrujl
kQLyxB
HcLj
NzM
G
dkT
z
IGXNEg
WvW
roPGca
owjUrQ
SsztQ
lm
OD
zXeM
eFfmz
MPk
