Vertical Research Partners downgrades Boeing: 'Throwing in the towel'

Published Wed, Jan 22 20208:48 AM ESTUpdated Wed, Jan 22 20204:03 PM EST

As Boeing's fallout from the 737 Max crisis continues, Vertical Research Partners said it's "throwing in the towel" on the stock and downgrading it to a hold rating. On Wednesday the firm made "major" cuts to its estimates for 2019-2022, saying "it could get worse before it gets better" and that the company has unresolved issues beyond the 737 Max. Vertical Research Partners also lowered its target on Boeing to $294, which is 6% below where the stock currently trades. Boeing shares have slid 17% over the last 6 months, so the firm did acknowledge that it was "belatedly downgrading" the stock. On Tuesday Boeing said that it doesn't expect regulators to sign off on the 737 Max until June or July , which is months later than the manufacturer had previously expected. Vertical Research Partners had previously thought that the planes would return to service on April 1. "While yet another push out in the estimated return to service of the MAX is bad enough, the ramifications of this have yet to reverberate," analyst Robert Stallard said in a note to clients. "From a Boeing perspective, this means over a year without deliveries of its most profitable product line, while customer compensation costs are likely to be higher than previously thought." Boeing releases fourth quarter results on Jan. 29 before the market opens, which Stallard thinks will be an "absolute disaster." He slashed his free cash flow estimates by $16 billion for 2019-2022, and predicts that the company will halt buybacks until 2022. Beyond the Max 737 issues, he said that Boeing has a "toxic corporate culture" which needs to be addressed before the company can turn a corner. In December, Boeing fired former CEO Dennis Muilenburg, replacing him with longtime board member and former GE and Blackstone executive Dave Calhoun. "While progress towards return to service of the MAX could help the stock in the short term, we think there will be investors looking to sell into any strength given the longer-term backdrop," Stallard said. Shares fell 1.4% on Wednesday. - CNBC's Michael Bloom contributed to this report.

An employee walks past a Boeing 737 Max aircraft seen parked at the Renton Municipal Airport in Renton, Washington, January 10, 2020.

Lindsey Wasson | Reuters

As Boeing's fallout from the 737 Max crisis continues, Vertical Research Partners said it's "throwing in the towel" on the stock and downgrading it to a hold rating.

On Wednesday the firm made "major" cuts to its estimates for 2019-2022, saying "it could get worse before it gets better" and that the company has unresolved issues beyond the 737 Max.

Vertical Research Partners also lowered its target on Boeing to $294, which is 6% below where the stock currently trades. Boeing shares have slid 17% over the last 6 months, so the firm did acknowledge that it was "belatedly downgrading" the stock.