What was Goldman Sachs thinking when they downgraded Boeing (BA)?

Question

I don't understand why Goldman Sachs downgraded BA. Boeing seems to have so many contracts for national defense and foreign governments that it makes no sense to say that just because of rising oil prices the company will do poorly. Just because U.S. airline companies are having financial troubles does not mean that all other foreign companies are going to downsize, too. What are your thoughts on their decision?

Answer 1

several reasons for this:

first: It isn't just American airlines that are getting hit by (comparitivley) high fuel prices, if anything EUR is having a harder time than we are, ex: people in the UK pay about $18 for a gallon of gas. demand for planes from overseas will be almost nill

second: in the US the only airline making a profit is Southwest, and they are making peanuts (pun intended), they are projected to earn $0.27 per share this year. No one on the american front is in good enough shape to order planes.

Third: Boeing is not doing as well as you think on the military front, they just lost out on a $25B project (I believe this was the size but you may have to double check it), they are suing to try to get the job but that is more sour grapes than anything.

Fourth: If McCain wins the whitehouse the war will continue (at least for a couple years, he would be terribly unpopular if it went for 4 or, if re-elected, 8 more years). If Obama gets elected he will pull out almost immeditaley. In either case their military income is not too long for this world.

I personally aplaud Goldman's Decision. I have had a sell on the stock since it was at 90 and a strong sell since it was at 107 (its 52wk high). I still think that the company ought to be about $50 a share, over the next few years I suspect they will slowly sink to a $30 stock.

Answer 2

Something like : " these half-wits can't complete their orders on time...and they whine when their over-priced bid is passed over... maybe their management is getting soft."