Boeing's 737 MAX 7 Was Supposed to Be Flying in 2019. The FAA Certified It Monday.

When Boeing (NYSE: BA) flew the 737 MAX 7 for the first time in March 2018, the company said the jet was on schedule for certification and delivery in 2019. On Monday, seven years past that target and several crises later, the Federal Aviation Administration finally issued the amended type certificate that clears the plane for commercial service.

Boeing shares rose 8% Monday to close at $233.49, within about 9% of their 52-week high of $254.35 and giving the plane maker a valuation of about $185 billion. The certificate wasn't the main driver, though. Boeing rallied on three things Monday: cheaper oil, a BNP Paribas double upgrade from underperform to outperform, and then the certification.

The approval matters for a simple, mechanical reason. Plane makers collect most of an airplane's price when they hand it over to the customer, and Boeing has spent years building jets it wasn't allowed to deliver. Certification is what turns that finished inventory into revenue. Monday loosened the bottleneck -- and I'd argue that matters more than Monday's tape suggests.

Image source: Getty Images.

What the certificate unlocks

The FAA described the approval as the product of "almost a decade of extensive review." Before signing off, the agency required updates to the jet's flight-control software and its crew alerting system, plus a redesigned engine anti-ice system. It also said its safety inspectors will stay on site at Boeing's factories to keep monitoring manufacturing.

The wait traces back to the two fatal MAX 8 crashes of 2018 and 2019, and later to the scrutiny that followed a cabin-panel blowout on a MAX 9 in early 2024. At one point, Boeing expected approval before the end of 2022.

Alongside the type certificate, the FAA issued an updated Production Limitation Record, the document authorizing Boeing to produce the aircraft.

"This important certification validates the rigor of our airplane's design and recognizes the determination and resilience of our 737 MAX development team," said Stephanie Pope, president and CEO of Boeing Commercial Airplanes, in the company's announcement.

The near-term payoff is sitting in storage. Boeing has already built about 30 MAX 7s that are awaiting delivery, according to aviation analytics firm Cirium. The jet seats 135 to 160 passengers and offers about 10% more range than other MAX planes.

Southwest Airlines, the launch customer, likely won't start flying the jet until next year, though. Its stored aircraft still need final-configuration work before handover, and airlines can take months to work a new plane into their schedules.

And Boeing's single-aisle deliveries have somewhere to go for years to come. Its MAX family order book stands at more than 7,200 airplanes, more than 2,300 of which have been delivered through June.

The recovery this plugs into

The certification lands on a business that was already measurably improving. Boeing delivered 171 commercial airplanes in the second quarter, up 14% from 150 a year earlier, and its 314 first-half deliveries were 12% higher than a year earlier and the most since 2018. Revenue rose 8% year over year to $24.6 billion.

Free cash flow, a non-GAAP measure, came in at $0.6 billion (modest, but positive). Total company backlog reached a record $715 billion. And the 737 program began stepping up toward a production rate of 47 jets per month during the quarter, with a new assembly line, the 737 North Line, entering low-rate initial production in July.

The bigger unlock could be close behind. Boeing has said it expects to certify the larger 737-10 this year as well, and certification flight testing on that jet is already complete.

With that said, investors shouldn't expect the certificate to transform this year's results. Boeing still lost money in the second quarter -- $0.67 per share under generally accepted accounting principles (GAAP), and $0.76 per share on a core (non-GAAP) basis -- and its July guidance anticipated the first MAX 7 delivery in 2027. The revenue impact is mostly a 2027 story, and even that could depend on how quickly the stored jets are readied for delivery.

So, does a promise finally kept seven years late make the stock a buy? It makes the recovery easier to believe. Deliveries are rising, free cash flow turned positive last quarter, and one of the two certifications Boeing has chased for years is now done.

But much of Monday's 8% jump was likely owed to that upgrade and to cheaper oil, too -- and the stock now sits within 9% of its 52-week high. A good chunk of the progress, therefore, is likely already in the price, and Boeing's net income is still negative for the year so far. At this valuation, I'm not buying after a one-day pop. If the MAX 10 certificate lands on schedule this year, however, I'll take that as my cue for a closer look.

Daniel Sparks and his clients do not have positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Boeing. The Motley Fool recommends Southwest Airlines. The Motley Fool has a disclosure policy.