Boeing shares tumble as parts issue halts deliveries of some 737 MAXs

(Reuters) – Boeing (NYSE:) Co’s shares fell 6% in premarket trading on Friday after the U.S. planemaker halted deliveries of some 737 MAXs due to a new supplier quality problem by Spirit AeroSystems (NYSE:).

Spirit, which manufactures fuselage, thrust reversers, engine pylons and wing components for the 737 MAX airplanes, slumped 14%.

The latest quality issue pertains to a fuselage fitting supplied by Spirit and is believed to date back to 2019, Boeing disclosed on Thursday.

“I don’t know if there’s a long term concern about the 737s for Boeing….” said Art Hogan, chief market strategist at Riley Wealth.

“We have known for quite some time that there was going to be a financial cost at Boeing in getting their house in order. What we didn’t know was how many of these 737s they were going to be able to deliver and it sounds like it’s even more than we estimated.”

Boeing warned that the issue will likely affect a “significant” number of undelivered 737 MAX airplanes both in production and in storage, and could result in lowered 737 MAX deliveries in the near term.

Analysts worry that the latest hiccup will weigh on Boeing’s plans to ramp up production of its bestselling jet amid an industrywide shortage of aircraft and warned of a likely hit to cash flow.

On the cash flow impact, Melius Research Vice President Scott Mikus said “that’s not entirely clear yet. It certainly makes it more likely.”

However, Bernstein analyst Caius Slater expects the issue to have a “relatively modest” impact on Boeing’s earnings and cash flow.

The problem, which affects a portion of the 737 MAX family of airplanes, including the MAX 7, MAX 8 and MAX 8200 airplanes as well as the P-8 Poseidon maritime surveillance aircraft based on the 737 NG, is not a safety of flight issue and in-service planes can continue to operate, Boeing said.

“We see more negative financial exposure to this news at Spirit than at Boeing,” said J.P. Morgan analyst Seth Seifman.

In February, the planemaker had to temporarily halt deliveries of its 787 Dreamliner jets to conduct additional analysis on a fuselage component.