Boeing shares tumbled at the start of the week following an announcement detailing stringent economy measures, including workforce downsizing and large impending costs-some of the most drastic measures taken under CEO Kelly Ortberg's leadership. Ortberg assumed the role of CEO in August.
In a recent internal communication, Ortberg revealed that the aircraft manufacturer would lay off around 10% of its employees, about 17,000 people, in the months to come. The company’s first 777x jetliner launch would also be delayed. "Our business stands in a precarious position, and the challenges we are facing together cannot be overstated”, said Ortberg. “We must be brutally honest about the work ahead and pragmatic about the timeline required to hit important milestones”.
Third-quarter pre-tax charges to its commercial airplanes and defense divisions are anticipated to stand around $5 billion, leading to a potential loss of around $10 per share in this period, Boeing stated. The aeronautics giant, grappling with numerous hurdles since the detachment of a door plug on an Alaska Airlines flight in January, received a debt downgrade warning from ratings agency S&P Global. This followed the company's decision to withdraw its contract offer to striking machinists.
Ortberg said layoffs were necessary and confirmed that the company would not move forward with another round of furloughs. Boeing had furloughed employees temporarily last month to save cash amidst the ongoing machinist strike.
In response to these new measures, on Monday, UBS analysts cut their projected Boeing share price to $215, down from the $220 per share. This reflects the diminished cash flow following the charges and postponed 777x jetliner. Nevertheless, UBS kept their "buy" rating intact.
"We believe restructuring costs and a more measured focus are crucial steps, though emphasize the long path to recovery," UBS analysts commented. "Decreasing the workforce is sensible since employee numbers are 10% above those in 2018, while revenue is 30% below."
Shares in Boeing dropped nearly 3% on Monday morning, falling to $147.41-marking a 43% decrease since the start of 2024.