Boeing's Massive China Sale Won't Affect Investors Right Away

Boeing announced on Wednesday it has reached an agreement to sell 300 aircraft to multiple Chinese airlines and leasing companies. However, Jason Gursky of Citi stated that investors should understand that the announcement is unlikely to translate to a near-term impact on the company's financials.

Just 'A Portion'

In a report published Wednesday, Gursky noted that only "a portion" of the orders that were announced appear to be new, while the remainder were already in Boeing's backlog.

Nevertheless, the agreement appears "supportive" of the long-term demand outlook for Boeing and should be viewed "constructively."

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'Strings Attached'

Gursky further pointed out that the announcement came with "some strings attached." Specifically, Boeing was required to commit towards a long-term partnership (including the opening of completion centers) with AVIC (Aviation Industry Corporation of China), and The Commercial Aircraft Corporation of China.

The analyst suggested that while the agreement may just be part of "the cost of doing business" in China, it represents a "double edged sword."

China's ambitions to build a large commercial aircraft has been well known, and the COMAC 919 is a "product of their effort." However, multiple delays in this aircraft make it "clear" there is still work to be done.

Boeing's commitment to provide supply chain expertise, leadership training and component work packages are all areas that will help the long-term goals of China's aviation industry.

Bottom Line

At this point, decisions on actual timing and locations of deliveries are "TBD" – which likely means that there won't be any near-term impact on Boeing's numbers.

Shares remain Buy rated with an unchanged $185 price target.

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