Leonardo Shares Struggle After Boeing Dreamliner Defect Report
By Alessandro Albano
Investing.com - Leonardo SpA ADR (OTC:FINMY)) shares have yet to bounce back after the heavy losses on Thursday. The stock is up a little over 1% at € 6.74 on Friday, after dropping -7% Thursday on reports of components issues in the Boeing Co (NYSE:BA) 787 Dreamliner jet production over the past three years.
Per a report in the Wall Street Journal, the defect involves titanium parts that are weaker than they should be, which has led to a backlog of over $25B in inventory. It adds to challenges Boeing has faced over the 737 Max and subsequent U.S. government concerns.
Boeing said the supplies were provided by Leonardo, who in turn would have bought them from the Italian company Manufacturing Processes Specification.
The Italian defense company has defended itself, saying that Manufacturing Processes Specification has been “qualified also by Boeing", and insisted, “Leonardo is the injured party and will not bear any potential costs associated with this issue”. Leonardo also confirmed that Manufacturing Processes Specification is no longer a Leonardo supplier.
Analysts recommendations still lean towards a Buy rating, with 9 analysts out of 16 collected by the MarketScreener platform recommending the purchase compared to 6 that remain on Hold, with an average target price of € 9.27, which would be 37% upside from the current price.
Boeing for its part ended yesterday’s trading up .55%, though lagging the broader U.S. market rally.
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