Boeing Co.’S BA problems continue as Moody’s Ratings downgraded the aircraft manufacturer’s credit score.
What happened: Moody’s lowered its rating on Boeing’s unsecured debt from Baa2 to Baa3, according to a report released Wednesday. Ba2 is the lowest possible investment grade rating.
The negative rating outlook concludes a review that began on March 26. Moody’s cited Boeing’s failure to reach expected levels of free cash flow generation due to underperformance in the flagship commercial aircraft segment.
The agency highlighted that this underperformance will likely impact Boeing’s ability to meet upcoming debt maturities in 2025 and 2026.
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Because matter: Boeing brass probably saw this coming as they are currently recovering from a long list of quality control issues.
While a Baa3 rating from Moody’s means Boeing is still considered “investment grade”, a lower rating would mean it is a “speculative” operation – so-called “junk” status.
Factors that could lead to a further downgrade include continued poor performance in the commercial aircraft segment, recurring reliance on debt markets, insufficient growth in aircraft deliveries, weakening liquidity and lack of improvement in financial metrics.
Boeing isn’t the only high-profile downgrade of late.
Moody’s on April 18 reduced its outlook for direct lending funds managed by major private equity firms – BlackRock Inc., KKR & Co. AND Oaktree Capital Management — stable to negative.
Before that, the company cut back Community Bancorp of New York to Ba2 from Baa3.
Moody’s also downgraded the entire US in November, citing fiscal challenges.
What’s next: Boeing’s liquidity is expected to remain sufficient, although Moody’s expects the company will likely issue new debt to strengthen its cash position and manage its maturity profile through 2026.
Boeing, based in Arlington, Virginia, operates in three main business segments, including its flagship commercial airplanes unit. Revenues total $77.8 billion for 2023.
The company is reportedly selling some defense assets and expects a slowdown in 787 production due to supplier shortages.
BA Price action: Boeing closed Wednesday at $164.33 per share, down 2.87%.
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