Boeing (BA) Approved to Test Battery, Receives Large Order
Shares of the Boeing Company (BA: Analysis) closed up +1.22 or +1.47 percent to $84.16 per share on Tuesday after hitting a five year high of $84.62 earlier in the day. Boeing stock was reacting to news that U.S. transport regulators had approved the company to test a redesigned battery for the 787 Dreamliner. In addition, Boeing won an order from Dublin, Ireland based Ryanair Holdings Plc (RYAAY: Analysis) to sell 170 of its 737-800 model planes in a deal worth $15.1 billion.
Boeing is phasing out the 737 in favor of the more fuel-efficient Max version. The deal will be officially announced next week. Daily Chart
Chicago, Illinois based Boeing Co. is one of the largest aircraft manufacturers in the world and the second largest defense and aerospace contractor in the United States. The company had revenue of $81.7 billion in 2012 and its stock is a component of the Dow Jones Industrial Average. After a battery fire on a Japan Airlines 787 at Boston airport and a subsequent incident involving a battery on an All Nippon Airways plane in Japan, regulators grounded 50 Dreamliners used commercially on January 16th. Late Tuesday, the U.S. Federal Aviation Administration announced it had approved Boeing's battery certification program, and would allow the company to test the new design on two of its aircraft. Boeing's newly designed battery, made by Japanese firm GS Yuasa Corp. was presented to U.S. regulators in late February. The new battery has better insulation and a containment and ventilation system to prevent damage in the event of a fire. In a statement issued by the FAA, Transportation Secretary Ray LaHood stated that, "We won't allow the plane to return to service unless we're satisfied that the new design ensures the safety of the aircraft and its passengers." In a statement issued by Boeing, CEO Jim McNerney said, "Our team has been working around the clock to understand the issues and develop a solution based on extensive analysis and testing following the events that occurred in January," he continued, "Today's approval from the FAA is a critical and welcome milestone toward getting the fleet flying again and continuing to deliver on the promise of the 787." According to Boeing customers and operators of the aircraft, the Dreamliner is expected to be back in operation by June, if all goes well. Boeing is losing approximately $50 million per week the plane is out of operation. The order for 170 737s to Ryanair was also a factor in Boeing's stock's rally on Tuesday. Ryanair had put their order for new aircraft on hold while the company bid on Aer Lingus Group Plc (AERL.L
). The takeover, worth over $900 million, was blocked for the second time by European regulators in late February. With Boeing stock at a 5-year high, earnings per share in excess of $5.00 and recommendations from major brokers, the stock could be ready to make new highs. Nevertheless, the stock may pull back in the near term, but could continue appreciating after the next earnings report on April 30th. Other News About BA Boeing Engineers' Union to Resubmit Unchanged Contract for New Vote
Engineers seek to end year-long labor dispute. Boeing's Latest Move Confirms Nationwide Trend to End Pensions
Boeing asks technical workers to drop pensions for new employees. Other Stocks in the News Samsung Targets Galaxy 4 at Apple's Core IPhone Market
Samsung turns up the heat on Apple. Twinkies Sold to Apollo Global Management, Metropoulos for $410 Million
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Published on Mar 13, 2013
By Jay Hawk