Boeing Shares Drop On Report That The SEC Has Opened An Accounting Investigation
Boeing shares dropped almost 7 percent after Bloomberg reported the Securities and Exchange Commission is investigating the company’s accounting.
According to the story, which cites unidentified people "with knowledge of the matter," securities regulators are looking into how Boeing has accounted for costs and expected sales of its 787 Dreamliner and the 747-8 jumbo jet. Spokesmen for Boeing and the SEC declined to comment.
The SEC is reportedly scrutinizing how Boeing uses a method called program accounting, a practice that allows companies such as Boeing to spread out the upfront costs of an airplane program over a number of years. Program accounting is kosher under generally accepted accounting principles.
Morningstar analyst Chris Higgins says investors are concerned that the SEC will find that Boeing’s financial assumptions have been too rosy.
"I think the market is suspecting that Boeing may have been aggressive with some of these estimates and if true, you could see an earnings restatement from Boeing," Higgins said.
Analysts and investors have increasingly been questioning whether the 787 Dreamliner program will ever yield an overall profit. The wide-body jet has been a lot more expensive to build than expected.
Still, the 787 has been popular with customers and Boeing has a backlog of more than 770 unfilled orders for Dreamliners.
Boeing recorded a $569 million after-tax charge in the most recent quarter related to the 747 program and said it plans to slow production of the plane because of lackluster demand for cargo jets.