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<< Previous   of   Next >>   ADVERTISEMENT   Related Stories • Be a man. Wear capri pants. 7/7/08   CONTACT THE HERALD Mike Benbow, Business Editor benbow@heraldnet.com   Published: Monday, July 7, 2008 Boeing tip ill considered, poorly timed By Mike Benbow Herald Writer I spent a small part of the July 4 holiday doing what I suspect a lot of people in the Puget Sound area did that day. I ate some burgers and talked about Boeing's stock price. Don't get me wrong. I own no Boeing Co. stock. It wouldn't be appropriate since I supervise The Herald's coverage and I edit the stories about the company that appear in our Business section. While I'm at it, let me throw out another disclaimer: If I actually knew what I was talking about when it came to the stock market, I'd be retired right now, likely fishing for trout on some stream in Montana. Instead, I'm here writing a newspaper column about my opinion, a subject upon which I am the world's foremost expert. And my opinion is that the Goldman Sachs analyst who recommended that everybody sell their Boeing stock could be way off the mark. For those who haven't heard: Sachs analyst Richard Safran downgraded his rating for Boeing from neutral to sell. "We expect the weak macroeconomic backdrop and record fuel prices to hurt airlines and translate to a significant slowing in the order book," he wrote in a June 25 research note. He put a $60 price target on Boeing for the next year, saying it could go even lower. The stock fell 5.5 percent on that day to $70.68 and continued to fall to $66.18 last Monday. That was the day the company established payouts for its incentive plan for most employees based on the stock price. Instead of getting about $3,000 worth of stock, employees will get about an $1,800 payout, all because of the sharp decline in the stock spurred by Safran's comments. I think that's an important point. The stock didn't drop because airlines had slowed their orders. Nothing has really changed since Safran made his comments. The stock tanked simply because Safran said it would. It closed Thursday at $64.01, just a bit above the 52-week low of $63.54. Safran probably knows quite a bit that I don't know about stocks in general and about aerospace specifically, but I still don't get all of his arguments. Boeing's commercial airplane business, which is only a part of what it does (it has military and space arms), seems to be doing pretty well right now. Safran suggests that soaring fuel prices will slow new orders. That may happen in the short run as the companies try to fill up their existing planes and cut back on the number of planes they're putting in the sky. But eventually, they're going to need more fuel-efficient planes, and that's what Boeing is selling. The companies with the most financial troubles are the U.S. airlines, and they're the ones with the fewest existing orders for new planes, so even if they cut back, it shouldn't hurt Boeing in dramatic fashion. Safran also suggested that the 787 isn't done having problems and that they could also hurt Boeing's stock. The company reported last week that a fuselage' was damaged during construction by a subcontractor, but all the other news about the plane has shown some improvement. If the production improvements continue, the 787 test flight scheduled for later this year will likely be a big boon for Boeing's stock. I don't know what's going to happen to Boeing's stock, but I don't think Safran really does either. And while I'm sure he doesn't care how his opinions might affect worker incentive pay, my opinion is that if he was going to tank the stock, he could at least have waited a few more days. Mike Benbow: 425-339-3459; benbow@heraldnet.com.

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