Boeing shares plummet after Goldman cut
NEW YORK (Reuters) - Boeing Co (BA.N) shares fell to a two-year low on Wednesday after Goldman Sachs cut its rating on the plane maker and defense company to "sell" from "neutral," reflecting falling orders, problems facing airlines and high fuel prices.
The stock fell 5.5 percent -- its biggest one-day drop in more than five years -- to $70.68 on the New York Stock Exchange, its lowest point since February 2006.
The stock is down 34 percent from its all-time high of $107.80 last July, hurt by delays on its 787 Dreamliner program and general concern about high oil prices.
"We expect the weak macroeconomic backdrop and record fuel prices to hurt airlines and translate to a significant slowing in the order book," said Goldman analyst Richard Safran in a research note published on Wednesday.
He put a $60 price target on the stock for the next 12 months, but said there was substantial risk the stock could go lower.
Safran, who downgraded the whole commercial aerospace sector to "cautious" from "neutral," expects orders for the sector to drop 50 percent in 2008 and another 50 percent in 2009 as airlines focus on restoring profitability through aggressive capacity cuts and price increases.
"Aerospace stocks are off nearly 30 percent from October highs, but history indicates the stocks could fall another 20 percent or more as we think the market is not factoring in that the combined effect of accelerated crude prices, a weak economy and rapidly deteriorating airline fundamentals could pose a worse problem for the aerospace group than 9/11 and SARS (severe acute respiratory syndrome)," wrote Safran.
He said there is more risk to the 787 program than is priced in as the program has yet to even enter flight test, where historically most issues on development aircraft are found.
Other aerospace suppliers also fell sharply on Wednesday, including Spirit Aerosystems Holdings Inc (SPR.N), Precision Castparts Corp (PCP.N), Textron Inc (TXT.N) and Honeywell International Inc (HON.N).
(Reporting by Esha Dey and Neha Singh in Bangalore, Bill Rigby in New York; Editing by Brian Moss and Deepak Kannan)
