Boeing Stock Is Up Because Any 737 MAX News Is Better Than Nothing – Barron’s

Federal Aviation Administration head Stephen Dickson was answering questions after a speech in London, and, according to reports, addressed new software issues in the 737 MAX that Boeing (ticker: BA) is correcting. Aviation stakeholders were initially spooked, sending shares lower after hearing about the software bugs. But after thinking it over, investors apparently decided nothing much has changed about the types of issues Boeing faces, or the time it will take to fix them.

At this point, any MAX news represents progress along the company’s timeline for the jet’s re-introduction to service. Boeing is still targeting “mid-2020” for MAX re-certification. The plane, Boeing’s newest single-aisle jet, has been grounded world-wide since mid-March, following two deadly crashes inside of five months.

A Boeing spokesman offered a detailed description of the software issue: “During flight testing of the 737 MAX’s updated software, an indicator light associated with the stabilizer trim system illuminated in the flight deck. We determined that the illumination of this light was caused by differences in input data between the flight control computers (FCC).” Boeing said the issue was a result of a software update issued in June 2019. It notified the FAA and its customers in late January about the issue and planned fix. “We are incorporating a change to the 737 MAX software prior to the fleet returning to service to ensure that this indicator light only illuminates as intended,” the spokesman added.

The stabilizer trim system refers to the rear, horizontal tail which shifts up or down to help the plane descend or ascend.

The FAA reiterated prior statements to Barron’s when asked about Dickson’s speech: “There is no set time frame for when the aircraft will be cleared for return to passenger service. It will be approved only after our safety experts are fully satisfied that all safety-related issues are addressed to the FAA’s satisfaction.”

Boeing stock is up more than $7, or 2.2%, in midday trading. Since the second MAX accident, which involved an Ethiopian Airlines flight, Boeing shares are down about 20%, trailing far behind comparable gains of the S&P 500 and Dow Jones Industrial Average over the same span.

There are a couple of big events coming for investors following the MAX situation that could move Boeing shares. Spirit AeroSystems (SPR), a key Boeing supplier, will eventually report fourth-quarter numbers, though the earnings release date hasn’t been scheduled yet. Spirit was forced to lay off about 2,800 workers after Boeing halted MAX production in January. Another event will be the scheduling of the 737 MAX re-certification flights after the FAA accepts Boeing’s proposed changes.