UPDATE: On Tuesday, equity research firm and broker Buckingham Research Group cut its rating on Boeing to Underperform. As aerospace consulting and research firm Leeham Co. noted this morning, this is very unusual. Among 27 other analysts’ ratings on Boeing, the two-thirds are Buy or Strong Buy and the rest are Hold. Buckingham’s rating is unique and we’ve taken a closer look at it.

For the first seven months of 2014, the Dow Jones Industrial Average (DJIA) is up more than 3% and the S&P 500 is up more than 8%. Boeing Co. (NYSE: BA), a member of the Dow 30 club, has seen its shares drop about 7%. In 2013, Boeing’s stock rose about 82%, compared with a rise of 28% in the DJIA and about 32% in the S&P 500.

What’s different this year? The company is taking orders for new planes at very good clip and the dollar value of its order backlog was $440 billion at the end of the second quarter, just $1 billion below the record set in the prior quarter. Net orders through August 26, 2014, total 918, including 640 737s and 18 787 Dreamliners. In 2013, the company took net orders totaling 1,531 new planes, including 1,208 737s and 183 Dreamliners. There’s virtually no way the company will match last year’s order totals.

The larger problem, though, is profitability. We’ve noted before the heavy discounts Boeing is having to offer to keep pace with its main rival Airbus. A 787-9 that carries a list price of $257.1 million can reportedly be purchased for less than $135 million. A 787-8 that carries a list price of $218.3 million can be had for $115 million.

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The impact on Boeing’s profitability is spelled out in the company’s second-quarter Form 10-Q filing:

The combination of production challenges, change incorporation, schedule delays and customer and supplier impacts has created significant pressure on 787 program profitability. If risks related to this program, including risks associated with planned production rate increases or introducing and manufacturing derivatives as scheduled cannot be mitigated, the program could face additional customer claims and/or supplier assertions, as well as a reach-forward loss that may be material.

Whereas last year the company’s future prospects looked brighter than ever, that glow has dimmed as investors begin to see the perils Boeing faces. In the first half of this year, Boeing has benefited from lower expectations and tax benefits totaling more than $500 million. The company raised its full-year guidance when it reported second-quarter results, but the share price did not respond positively.

The company’s anticipated commercial aircraft deliveries for 2014 have remained constant since the beginning of the year at 715 to 725 planes. Boeing is also discounting its bread-and-butter aircraft, the 737, and the plane that carries its highest list price, the 777-300ER, which carries a list price of $330 million and has been discounted to around $128 million. Investors have been wary of the stock because it is not clear that Boeing has a near-term way to reduce its discounting. The pressure from Airbus forces Boeing to compete on price, and the company can’t make up the difference on volume. It’s a nasty place to be.

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