Investor Alert

March 12, 2020, 3:02 p.m. EDT

Boeing’s push to preserve cash and tap huge credit line spooks investors

Boeing shares close under $200

By Claudia Assis, MarketWatch

This update corrects the timeframe for historical data on Boeing stock, according to an update issued by market-data provider FactSet. Boeing’s 18% decline on Thursday was the stock’s largest one-day decline based on available data going back to 1972.

Bloomberg News/Landov
A Boeing Co. 777X airplane lands at the Boeing Field in Seattle in January.

Boeing Co. investors headed for the hills Wednesday after the company was said to be planning to use a credit line to the last penny and took steps to preserve its cash amid the novel coronavirus pandemic.

Boeing (NYS:BA)  stock fell 18% to end at $189.08 on Wednesday, its lowest level since July 7, 2017, and the largest one-day percentage decline based on available data going back to 1972. The shares traded as low as $187, nearly 60% lower than their closing record of $440.62 on March 1, 2019.

Earlier Wednesday, a Bloomberg News report that cited people familiar with the matter said the plane maker was planning to draw down the full amount of a $13.825 billion loan as early as Friday.

Boeing got the credit agreement in February from a bank syndicate that included Citigroup and J.P. Morgan, and the amount was said to grow from the $10 billion initially sought.

See also: Airline stocks slammed by coronavirus fears, but experts say reaction may be overdone

Also Wednesday, a Boeing memo to employees said the company was imposing a hiring freeze and limiting travel and overtime in a bid to preserve cash, according to The Wall Street Journal.

Boeing has struggled with the fallout from two deadly crashes involving its 737 Max airplanes and the subsequent worldwide grounding of the planes. The 737 Max’s return to service has been repeatedly delayed. Boeing, which has halted production of the planes, has said it expects the aircraft back to the skies by mid-year.

Related: Coronavirus update: 121,564 cases, 4,373 deaths, WHO declares a pandemic

Adding to those concerns, the COVID-19 pandemic has hit air travel, and is bound to impact Boeing’s commercial-airplanes business, the company’s largest revenue stream.

Analysts at Jefferies said in a note Wednesday that they are cutting their forecasts on Boeing plane deliveries, saying a previous expectation of 4% net fleet growth is “no longer valid in a scenario where we assume a 9% decline in air traffic and impact to airline profitability.” The analysts kept their rating on Boeing shares at buy.

“The fear for investors now is that COVID-19 appears to be the ‘black swan’ event that is finally ending the commercial aerospace cycle,” analysts at Canaccord Genuity said in a note on Tuesday, adding they are favoring names more exposed to the defense sector to sidestep the risks brought by the virus to commercial aerospace, such as Kratos Defense & Security Solutions Inc. (NAS:KTOS) , AeroVironment Inc. (NAS:AVAV) , Aerojet Rocketdyne Holdings Inc. , Mercury Systems (NAS:MRCY) and Rada Electronic Industries Ltd. . 

Boeing shares have lost 50% in the past 12 months, compared with losses under 1% for the S&P 500 index (S&P:SPX)  and around 6% for the Dow.

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