(By Mayur Pahilajani - iStockAnalyst Writer) Seattle, WA - A day after the most disruptive strike of the decade at the Chicago-based defense contractor and aerospace firm, Boeing Co. (NYSE: BA), ended, Goldman Sachs Group Inc. (GS) analysts added the stock to its "conviction sell" list.
Shares of the world's second biggest commercial-aircraft manufacturer declined after the company's stock was downgraded from "neutral" rating. Goldman Sachs analyst Richard Safran wrote to its clients in a note on Monday that there is no change to the cyclical and weakening economic fundamentals.
On Sunday, Boeing announced that the 52-day strike ended as the new four-year settlement, which covers employees in Washington, Oregon and Kansas, was ratified by the workers with a simple majority vote by 74 percent in favor of the contract.
An estimated 27,000 workers walked off the job at 3:01 a.m. Eastern Daylight Time on September 6 after two-day long talks failed to prevent the machinists from staging a walkout. The strike had crippled the manufacturing of the new plane, the 787 Deamliner.
"We're looking forward to having our team back together to resume the work of building airplanes for our customers," Scott Carson, Boeing Commercial Airplanes president and CEO, said in a statement on November 2. "This new contract addresses the union's job security issues while enabling Boeing to retain the flexibility needed to run the business. It rewards employees for their contribution to our success with industry-leading pay and benefits and allows us to remain competitive."
The new contract is aimed to enhance job security, compensation and benefits. Under the four-year contract, the workers will receive general wage increases of 15 percent over the contract period, an immediate 16 percent pension increase and lump-sum payments of at least $8,000 over the life of the agreement.
The International Association of Machinists and Aerospace Workers (IAM) said that the four-year pact, rather than the three year contract, is also likely to limit the amount of work outside vendors can perform in the workplace. The IAM represent more than 700,000 active and retired members in industries including airline, aerospace, manufacturing, railroad, woodworking and shipbuilding sectors.
However, the outlook of the aerospace firm does not look positive as the strike as ended during the time when large companies are struggling with the credit crunch and unstable market conditions. When the workers went on strike, the market status was relatively calm.
Goldman Sachs's analysts said that the aerospace sector has yet to capitulate to current market conditions "implying downside to company guidance and consensus estimates." Last week, Goldman's Safran reduced delivery outlook for Boeing to 462 aircrafts in 2009 and 392 aircrafts in 2010, compared with his previous forecasts of 489 and 524, respectively.
The company is expected to produce at least 40 airplanes every month to reach its 2008 projected deliveries. In its quarterly report, the firm showed that the halt in production has slashed its commercial airplane deliveries by 35 units in the same period.
The brokerage firm has slashed its earnings per share for the company to $6.45 down from $6.80 for fiscal 2009 and $6.30 per share, down from $7.35 for fiscal 2010. On Friday, the shares of the company had closed higher by $1.72 or 3.39 percent to $52.42. The stock has traded as high as $98.67 and as low as $39.99 in the last 52-week period.
