How Have These 787 Dreamliner Stocks Fared One Month Later

Michael Teague |

The much-anticipated Boeing (BA) 787 Dreamliner has been plagued with an ever-growing list of technical malfunctions in the run-up to scheduled deliveries of the new airliner to carriers in the beginning of 2013.  The most high-profile of these have been the incident on Jan. 7, when the lithium-ion battery on a Japan Airlines 787 exploded just a short time after passengers deplaned in Boston from a non-stop flight from Tokyo.  The next one took place on Jan. 16, when an All Nippon Airways Dreamliner was forced to make an emergency landing at Takamatsu airport after smoke began to fill the cockpit.

These high-profile battery malfunctions were preceded by several incidents in which problems with brakes, cracked windows, and fuel leaks had been reported. The fallout from the Jan. 16 incident has prompted the FAA, as well as other transportation agencies around the world, to ground all 50 of the Dreamliners that have so far been delivered to carriers, while for its part, Boeing has halted all new deliveries, pending an ongoing investigation of the battery malfunctions.

There is trouble in this not only for Boeing, as the FAA’s certification process and testing procedures have also come under heavy scrutiny.  For the time being, the probe into the battery malfunctions is the primary concern, and the FAA says it will wait for that outcome before it decides whether its own processes will need any kind of reform.

For all of this, Boeing hasn't been significantly punished by the markets, with a Jan. 7 close of $76.13, falling about 3 percent to hit a low of $73.87 on Jan 31, before rebounding to $76.29 on Feb 6.

But there are other companies involved, particularly those that have been subcontracted by Boeing to provide the windows, fueling systems, and brakes for the new Dreamliners. GS Yuasa Corporation (GYUAF), responsible for the lithium batteries, lost 12.6 percent of its stock price in the week following the Jan. 7 incident.

Spirit Aerosystems Holdings Inc. (SPR), responsible for the forward fuselages, closed Jan. 7 at $17.15, and has since gone down nearly 7 percent to as low $15.96, though it is currently holding at around $16.39 (as of Wednesday).

Hexcel Corp. (HXL), the engine parts manufacturer, closed Jan. 7 at $28.80, and had dipped about 8 percent to as low as $26.50 before rallying back to $27.00 on Wednesday.

Ducommun, Inc. (DCO), a minor parts supplier for the Dreamliner, has been even less minimally affected by the controversy, ending Jan. 7 at $16.83, and ended Wednesday at $16.15 (going only as low as $15.86 on the way).

The relative absence of a market backlash is the result of a number of factors, primary among them being the possibility that investors are still awaiting the outcome of the FAA investigation.  If it turns out that the FAA shares a larger portion of the blame than that of which we are currently aware, it is possible that Boeing could be spared some of the worst consequences.  Meanwhile, the company had only delivered 50 of its Dreamliners before the high-profile incidents caused them to halt all deliveries.  Furthermore, it has continued production of the planes, which could also be a bolster to investor confidence.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
BA Boeing Company (The) 131.74 0.71 0.54 3,118,877
DCO Ducommun Incorporated 22.84 1.03 4.72 110,366
HXL Hexcel Corporation 44.30 0.95 2.19 602,768
MERK Merck Tbk n/a n/a n/a 0
SPR Spirit Aerosystems Holdings Inc. 44.54 0.46 1.04 1,447,321

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