Boeing Stock Plummets to 6-yr Low on S&P Downgrade

Boeing Stock Plummets to 6-yr Low on S&P Downgrade
March 18, 2020


The stock of Boeing Co (NYSE: BA) lost 4.22% or $5.47 to close at a six-year low of $124.14 after the aircraft manufacturer was placed on “credit watch – negative” by Fitch, mirroring the negative effect of the coronavirus on the aviation industry. Furthermore, Standard & Poor’s has also downwardly revised the company’s debt rating. Including yesterday’s loss, the stock has depreciated by roughly 25% in the past two days. According to Bloomberg data, Boeing’s outstanding loans and public bonds are valued at $27.90 billion. The company is also in touch with White House officials to discuss a multi-billion dollar loan.

Fitch Ratings has placed the ‘A- long-term issuer default and senior unsecured debt ratings’ of Boeing and its subsidiary Boeing Capital Corp. on Rating Watch Negative, pointing to additional risks on the aviation industry due to the outbreak of the coronavirus. Boeing’s long-term default rating already carries a negative outlook because of the indefiniteness associated with the return of 737 MAX to commercial service.

Furthermore, the ‘F2 short-term issuer default and senior unsecured debt’ ratings of the aircraft manufacturer was also placed on Rating Watch Negative. Fitch pointed out that the company faces domestic and international issues because of the virus outbreak. The agency also stated that its Global Services division would likely be affected by a decline in air traffic, with the intensity of impact contingent upon the harshness and time period of the epidemic.

In the US, several employees of Boeing at Everett facility have been affected by the coronavirus. If there is a slowdown or shutdown in production, the outcome can be quite severe, according to Fitch. Even after the prevailing restrictions on 737 MAX aircraft are lifted, the virus related issues could continue to have a negative impact on increasing the speed of delivery of aircraft, which is very much needed to bring down the debt pile.

Fitch Ratings downwardly revised Boeing’s long-term credit rating to ‘A-‘ from ‘A’, pointing to regulatory issues related to the timeframe for 737 MAX to take off the ground again. The international rating agency stated that the MAX issues have resulted in the evaporation of Boeing’s financial leverage, making it more vulnerable to unexpected developments. The ‘A’ category reflects high credit grade with anticipations of low default chances.

Fitch anticipates Boeing’s debt to increase in the first two quarters of 2020 and likely hit a record high of over $32 billion-$34 billion. The rating agency also anticipates the debt to almost double to roughly $27 billion in 2019.

Notably, in January 2020, S&P Global Ratings placed Boeing’s ‘A-‘ credit rating on ‘credit watch,’ pointing to an increase in costs and cash outflows as the jet manufacturer faces additional delays in the getting its grounded 737 MAX aircraft recertified.

Yesterday, Standard & Poor’s downgraded Boeing’s debt rating by one notch to BBB from A-. The rating agency also stated that the aircraft manufacturer’s cash flow for the next two years would be slightly weaker than earlier anticipated. Independently, Boeing has confirmed that it is negotiating with White House officials and Congress leaders for short-term financial aid worth billions of dollars.

The stock is expected to remain weak on a plethora of issues (737 MAX grounding, coronavirus, debt, etc.) faced by the company.

The historical price chart indicates that the stock of Boeing had a free fall in the past few days. Furthermore, the ultimate oscillator is in the bearish zone, while the stock is trading below its 50-day moving average. Therefore, we are anticipating the stock to remain range-bound with bearish bias in the next few days.

boe - technical analysis - 18th March 2020

Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.


Andrew Wright

Prior to founding in 2014, Andrew worked as a proprietary trader, then as a market maker. As a market maker, he traded options in over 100 stocks, he then began trading currency pairs in 2013. Andrew still actively trades both, and prides himself on educating and informing traders on the benefits of both Binary Options and Forex.

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