A high-profile television stock analyst says he’s buying Boeing Co. stock with the expectation that the company will beat back the striking Machinists union and cash in on the rebounding aerospace market.
“I’m confident that Boeing is butting heads with the union, not because it likes the confrontation, but because it believes it ultimately has the upper hand in the negotiations,” Jim Cramer, the host of CNBC’s “Mad Money” and a columnist for RealMoney.com, said in a note to subscribers on Wednesday.
| DateClosing price
Aug. 31$67.02 Sept. 1$65.99 Sept. 2$64.34 Sept. 6$65.03 Sept. 7$64.50 Sept. 8$64.59 |
Striking Machinists on the Everett picket lines were not impressed.
“He might have some strange concepts,” said Chuck Mealy, a milling machine operator from Arlington. “I’ll stay out as long as I have to.”
Mealy spoke as the first week of the International Association of Machinists strike against Boeing came to a close with no sign of new negotiations. Union members walked off the job last Friday after 86 percent of them voted to reject the company’s final contract offer.
Cramer did not respond to an e-mail request for an interview. But during his Wednesday night show, he called the standoff between Boeing and the Machinists a “historic confrontation” that the company is poised to win.
Boeing’s aggressive stance against the union makes its stock more attractive, Cramer said, according to a recap available from TheStreet.com. In notes to subscribers, Cramer said he added 700 shares of Boeing stock to his holdings this week.
“Boeing is playing hardball with the Machinists, but I have to tell you that I don’t believe the company would be so hard-nosed in the negotiations if it didn’t believe it could win,” he said. “Boeing must have an edge on how to deal with a potential walkout, or I bet it would be much more willing to negotiate.”
Aerospace analyst Paul Nesbit of JSA Research said he was inclined to agree with Cramer.
Boeing will feel the pain in the short term, Nesbit said. If the strike lasts until the end of the month, the company will miss out on revenues from 42 planes it had planned to deliver, he said.
Given that, it’s profits will fall 15 to 20 cents a share during the third quarter, Nesbit predicted. Boeing reported a profit of 70 cents a share, or $566 million, during the second quarter this year.
Machinists say Boeing’s refusal to increase pensions is a major reason for the strike. But Boeing’s “going to be quite hard-nosed about keeping those costs relatively in line,” Nesbit said.
The company’s also likely to hold a hard line on health care costs, he added. The cost of providing health care went up 10 percent, and Boeing can’t raise jet prices enough to compensate.
“It could be a long strike,” Nesbit said. “The union’s demands are so much greater than the company’s best offer, it’s going to take a while to reach a compromise.”
Strikers on Thursday agreed. The walkout will last “three months, I bet ya,” said Dale Burt, a 777 mechanic from Mount Vernon.
“I’m guessing till after Thanksgiving,” added Al Richter, another striking Machinist.
But they disputed the analysts’ views of the deadlock.
Mealy said he voted against the contract because of provisions that would allow Boeing to assign workers to operate more than one machine at a time. Boeing said this change to “simultaneous machining” wouldn’t result in any layoffs, but Mealy said he believes it would inevitably mean his job would be eliminated.
Given that, he’s prepared to stay out indefinitely.
“If I’m going to lose my job over this, what do I care?” he asked. “I don’t really care what happens to the company. … They can dangle $100,000 bonuses out. If I lose my job, it’s going to be worthless.”
Richter said he didn’t vote to strike in 2002 because he felt “the company needed that hand up.” But since then, profits have climbed, yet Boeing “just wants to throw us away,” he said. So this time he voted to walk out.
Cramer’s bullish outlook on Boeing did little to move the market Thursday. Shares of Boeing stock ended the day at $64.59, up 9 cents. It closed at $67.02 on Aug. 31, the day before Machinists voted to strike.
Cramer told subscribers Wednesday he expects Boeing stock to climb to $70 a share by the end of the year. He said he plans to hold on to his shares unless they fall below $62.
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