During the 2Q09 earnings call, Boeing seemed to be laying the foundation that a forward loss might be forthcoming on the 787 program and some analysts shortly thereafter issued notes predicting there will be one. However, within the last two weeks two analysts that we know of have taken a different view. (We see reports from only six of the aerospace analysts who cover Boeing.)
Richard Safran, the former lead aerospace analyst at Goldman Sachs, now is with Buckingham Research and initiated coverage Aug. 12 with an Accumulate rating. He says this about the prospect of a forward loss:
Our analysis indicates the 787 is not in a forward loss position. That estimate assumes that BA will choose an accounting quantity sufficiently large such that total program revenues will exceed costs; we think that is 850-900 airplanes. BA has disclosed only limited information regarding 787 expenditures to date. The 787 accounts for approximately $8bn of BA’s inventory and we estimate that by first delivery, that will rise another $6.4bn (assumes $800mn per quarter in deferred production costs & tooling).
Safran’s Accumlate rating is in stark contrast to his early Sell rating while at Goldman.
Safran’s successor at Goldman, Noah Popanak, today issued a report on Spirit Aerosystems, which supplies the nose section for the 787. He wrote this:
Regarding 787, we believe the market is widely anticipating that Boeing’s next schedule will include a substantial delay, and drive a reach forward loss (costs greater than revenue) for BA and SPR. However, we see some probability the delay will be modest and neither BA nor SPR will face a reach forward loss. In the factory we saw that fuselage unit #9 was no longer there and #10 was queued up, meaning SPR is still shipping 787 sets to BA and could actually hit its target of ten units for the year.
The upbeat reports, taken with news last week from Jon Ostrower’s Flightblogger that first flight may be targeted for late November or early December, with EIS in 4Q10 (neither as yet confirmed by Boeing), has sent Boeing stock up significantly since last week.