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© Reuters. Boeing (BA) target cut as Bernstein says company may have to pay $1bn or more in compensation

Bernstein analysts lowered the Boeing (NYSE:) price target to $245 from $272 in a note Monday, maintaining an Outperform rating on the stock. The firm said they believe Boeing may have to pay $1 billion or more in compensation, stemming from the impact of grounded MAX-9s and certification delays to the delivery of the new model.

In the note previewing Boeing’s Q4 earnings on Wednesday, January 31, analysts said they see two ways this could play out.

According to analysts, there could be a narrow focus on the problems at hand or a broader clampdown on Boeing and its processes.

“Now, with more information from the FAA, the answer appears toward the clampdown,” they wrote. “But, as we await more detail, the impact may be manageable, even though it pushes back deliveries and FCF.”

“A quality audit will be performed by the FAA that should be much more extensive than recurring audits that may take two weeks,” they added. “We assume the rate stays at 38/month until April, although that timing could shift. We effectively move the production ramp back by one quarter.”

Bernstein assumes no MAX-7 or MAX-10 certification before 2025, while they note that a downside risk is if Boeing cannot get exemptions at all for those certifications.

“We assume compensation will be required for the impact of grounded MAX-9s and certification delays to delivery of new models,” wrote analysts. “We assume $1bn for compensation, although one could argue that it is more or less.”

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