Boeing CEO Dave Calhoun leaving the company seen as good news for the stock

By Tomi Kilgore

Chairman Kellner won't run for re-election, and COO Stephanie Pope will replace Stan Deal as CEO of Boeing Commercial Airplanes

Shares of Boeing Co. rose Monday, as the aerospace and defense giant's chief executive, Dave Calhoun, said he will step down at the end of the year.

The embattled company also announced several other management changes. The CEO of its commercial-airplanes business will retire, and the chairman of the board will step down.

"The eyes of the world are on us, and I know that we will come through this moment a better company," said Calhoun, who became Boeing CEO in January 2020.

The stock (BA) rose 1.2% in active afternoon trading, but pared earlier gains of as much as 3.9%. Trading volume was around 9.8 million shares, already more than the full-day average of about 7.7 million shares.

Vertical Research Partners analyst Robert Stallard said it's rare that someone losing their job is cause for celebration, but he believes Calhoun's departure is a "wise" move by the company.

Calhoun has faced mounting pressure recently given the recent quality-control issues on commercial jets made by Boeing, including the blowout of a panel on an Alaska Airlines plane in January.

The quality problems have led to production pauses. Deliveries have fallen behind last year's pace and the company's stock has fallen.

Calhoun said in an interview on CNBC that his departure to was "100%" his decision: "It's me giving them notice that at the end of this year I plan to retire."

He noted that at the end of 2024, he'll be close to 68 years old.

Regarding complaints that Boeing's focus was more on sales than safety, Calhoun said on CNBC that the plan is to "slow things down."

Vertical Research's Stallard wrote in a note to clients: "Many of Boeing's customers, suppliers and other stakeholders have arguably lost faith in the company, while its relations with the FAA [Federal Aviation Administration] and NTSB [National Transportation Safety Board] are clearly strained."

He said the fact that the company has not yet identified a replacement for Calhoun leaves a "major piece that is missing from the puzzle," that shouldn't worry investors as much as Calhoun's departure pleases them.

And Benchmark's Josh Sullivan said he believes the management changes were necessary to appease regulators, customers and investors, and are a "positive for resetting the table."

He reiterated his buy rating on the stock and his $250 price target, which implies about 30% upside from current levels.

Boeing's stock has tumbled 26.7% year to date, to make it the worst-performing Dow Jones Industrial Average DJIA component this year, and the S&P 500 index's SPX second-worst performer.

In comparison, the U.S.-listed shares of France-based rival Airbus SE (EADSY) (FR:AIR) have run up 19.3% this year, and were on track to close at a record high.

Separately, Larry Kellner, who has been chairman of the board since 2019, said he does not plan to stand for re-election at the upcoming shareholder meeting.

The board elected Steve Mollenkopf to succeed Kellner. Mollenkopf has been a Boeing director since 2020, and was a former CEO of Qualcomm Inc. (QCOM)

Mollenkopf will lead the board's process of selecting Boeing's next CEO.

Stan Deal, CEO of Boeing Commercial Airplanes, will retire after being in the position since October 2019.

He will be succeeded by Chief Operating Officer Stephanie Pope, who had been chief financial officer of Boeing Commercial Airplanes from December 2020 to March 2022.

"Boeing is in deep need of a change in culture around safety and quality," said Timothy Hubbard, assistant professor of management at the University of Notre Dame's Mendoza College of Business. "These changes take time, but can be accelerated by new leadership."

-Tomi Kilgore

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03-25-24 1404ET

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