Boeing jet troubles puts harsh focus on software automation

Automation is being sold to us as a panacea.

Removing irrational human impulses is supposed to make planes, trains, automobiles and other machines safer.

Last week, a cutting-edge Boeing 737 Max jetliner plunged from the sky, killing all 157 passengers and crew aboard Ethiopian Airlines Flight 302.

It was the second such crash in four months, grounding the aircraft all around the world and raising speculation the problem is software-related.

Automation-software stocks have been grounded along with the Boeing jet. It’s an opportunity rare for investors.

The Max is an aerospace engineering oddity.

Two Boeing 737 MAX 8 crashes in Indonesia and Ethiopia, which resulted in 300+ fatalities, were so similar that “Unsafe at Any Speed” author Ralph Nader penned an open request to Boeing to ground the aircraft. Nader’s 24-year-old granddaughter, Samya Stumo, died in last week’s crash.

The fourth-generation 737 seats up to 230 passengers, a 27% bump over the classic.

Yet, larger CFM turbofan engines, positioned ahead of the wing, distinctive split-tip winglets and other changes make the aircraft 14% more fuel-efficient.

Unfortunately, the rejiggered avionics brought an unintended consequence.

The nose of Max aircraft often lifts unexpectedly during high angles of attack and steep turns. Both are maneuvers common to takeoffs. In the worst case, this position could cause stalling.

To compensate, Boeing engineers implemented the Maneuvering Characteristics Augmentation System.

MCAS is a set of anti-stall software protocols that automatically lift the tail flags and push the nose lower.

Last October, 189 passengers were killed in Indonesia when a Lion Air jet crashed minutes into the flight. It was the first time a Max aircraft failed. Preliminary findings suggest a faulty sensor coupled with MCAS may be responsible.

Similarities to the Ethiopian Airlines crash are alarming.

The captain of Flight 302 reported a flight control problem just after takeoff, The New York Times reported. And air traffic controllers noticed the aircraft was flying erratically, gaining and losing hundreds of feet in altitude.

The response from Boeing has been brisk. The company promised a software fix within 10 days, and full cooperation with all ongoing investigations.

The Max, with its unapparelled fuel efficiency, has become a symbol for technological innovation. It’s also an industry workhorse. The aircraft is in use at 69 airlines around the world. Backorders now exceed 5,000 units.

More important, the relative low failure rate of this jetliner is responsible for a groundswell of consumer confidence.

We take for granted commercial aircraft are safe. We assume they can fly, and even land, using automation.

It’s a transformation that is playing out in high-speed trains and automobiles, too.

  • DAF, a unit of PACCAR (PCAR), demonstrated autonomous truck technology in 2016.

One way or another, automation is coming to all the transportation sector, soon.

The Ethiopian Airlines tragedy is a setback. But it will not change the trend.

PTC Inc. (PTC) offers a comprehensive way to invest in automation. Its industrial innovation platform has been embraced across every sector. From aerospace and automotive, to oil and gas, and retail, leading companies use PTC software to automate processes and maximize competitiveness.

The Boston company boasts 800 partners and a developer ecosystem 550,000 strong. They are all focused on one really big idea: Networks of connected things should provide total awareness. PTC software makes those connections seamless.

ThingWorx, its Internet of Things platform, allows companies to quickly build, connect and analyze networks of sensors, machines and software protocols. According IT research firms Gartner, IDC and many others, ThingWorx is best-in-class.

Bain & Co., a global management consulting firm, predicted in 2018 that the combined market for IoT software, hardware, systems integration, and data services will grow to $520 billion by 2021, more than double the 2017 spend.

In an era of sensors, data and super complex machines like the Boeing 737 Max, that kind of growth makes good sense. Software that binds everything together is more important than ever.

PTC shares trade at 56x forward earnings, for a total market capitalization of $10.8 billion. That is only a fraction of top rivals such as Adobe Inc. (ADBE) at $125.7 billion, and Autodesk (ADSK) at $33.6 billion, respectively.

The stock completed a four-month consolidation between $77 and $90. It is down from a record high of $107.50 last October. The current weakness is an opportunity. PTC is a leader in a huge new market for software services. Shares should double over the next three years.

Long-term oriented investors should consider owning the stock ahead of that growth.

Best wishes,
Jon D. Markman

About the Editor

Jon D. Markman is winner of the prestigious Gerald Loeb Award for outstanding financial journalism and the Society of Professional Journalists' Sigma Delta Chi award. He was also on Los Angeles Times staffs that won Pulitzer Prizes for coverage of the 1992 L.A. riots and the 1994 Northridge earthquake. He invented Microsoft’s StockScouter, the world’s first online app for analyzing and picking stocks.

Top Tech Stocks
See All »
B
MSFT NASDAQ $419.33
B
AAPL NASDAQ $171.57
B
NVDA NASDAQ $895.16
Top Consumer Staple Stocks
See All »
B
WMT NYSE $60.66
Top Financial Stocks
See All »
B
B
V NYSE $279.05
B
JPM NYSE $200.07
Top Energy Stocks
See All »
B
B
CVX NYSE $157.38
B
COP NYSE $128.31
Top Health Care Stocks
See All »
B
AMGN NASDAQ $287.94
B
SYK NYSE $357.86
Top Real Estate Stocks
See All »
Weiss Ratings