Boeing selloff overdone despite CEO's production comments, BofA says

Boeing's stock took a 6% tumble this week following CEO Kelly Ortberg's admission of ongoing challenges in production of the 737 and 787 aircraft, alongside a further delay in 777X certification. However, Bank of America believes the market's reaction was exaggerated, emphasizing that Boeing's turnaround was not a linear process.

Ortberg revealed that the 777X certification testing is now anticipated to be delayed until 2027, an extension of the already seven-year-delayed program. The CEO linked the delay to a pending approval for a more durable seal on the GE9X engine, supplied by GE Aerospace.

Despite these setbacks, Bank of America maintains that the company's first deliveries of the 777X remain on track for the following year, aligning with the bank's estimate of zero 777X deliveries in 2026 and 10 in 2027. The analysts noted a significant improvement compared to the previous year and highlighted a potential risk from a possible SPEEA strike, with the union's current contract due to expire on October 6.

Regarding the 737 program, Ortberg's comment that production ramp has not stabilized at 47 aircraft per month was the most market-moving remark. The bottleneck remains in-house wing production, although the broader supply chain is holding up, and Boeing has plans to address it. The analysts observed this type of growing pain as usual when scaling production of a large, complex aircraft.

On a more optimistic note, Boeing anticipates certification of the 737 MAX 10 variant very soon. This variant constitutes 30% of Boeing's 737 backlog and is considered a key contributor to free cash flow. Bank of America's 2026 forecast of 519 737 deliveries remains unchanged. The analysts noted that Ortberg's remarks add some risk to the bank's 2026 free cash flow estimate of $2.4 billion, but the bank remains comfortable with this forecast for the time being.