Boeing jumps on cash generation as jet deliveries surge

Boeing generated $2.58 billion in free cash flow in the second quarter, far exceeding expectations as a flurry of jet deliveries and customer deposits helped overcome the financial strain from supplier glitches.

Analysts had expected the manufacturer to burn through almost $74 million in cash after it grappled with output disruptions to its workhorse 737 Max and the 787 Dreamliner, based on data compiled by Bloomberg.

Boeing shares advanced 4% as of 9:31 a.m. in New York as it also beat on revenue and earnings.

In a sign its aircraft production is stabilizing after years of turmoil, Boeing is starting to raise output of its 737 jetliners to a 38-jet monthly rate. That’s a 23% jump from the previous manufacturing pace, which had been in place for about a year as the U.S. plane maker worked to get its factories and suppliers in sync.

Still, Boeing notched its eighth straight money-losing quarter. The adjusted loss stood at 82 cents a share, according to a statement Wednesday, compared with an 84-cent loss anticipated by analysts.

“This is a complex business, and we expect challenges to come up. When they do, we are transparent, we take action and we move forward, one airplane at a time,” Dave Calhoun, Boeing’s chief executive officer, said in a message to employees. “While it can be difficult in the moment, this is what progress looks like.”

The plane maker has mapped out a series of production increases that would return its factories to near pre-COVID levels by mid-decade, reiterating a target of reaching 50 737 deliveries per month in 2025 or 2026. The steps are crucial if Boeing is to reach Calhoun’s goal of generating $10 billion in free cash in that time frame.

A strike at fuselage supplier Spirit AeroSystems last month threatened to damp progress but was quickly settled. Boeing and rival Airbus have both cautioned that supply constraints continue to hurt output and might remain a headache for years.

Airbus is expected to provide insights into a new engine issue when it discloses its results later on Wednesday. Before the report, Boeing shares had gained 12% this year, outpacing the 6.9% increase for the 30-member Dow Jones Industrial Average. Airbus, based in Toulouse in France, is up about 19%.

Boeing’s defense and space division posted another quarterly loss as it struggles with worker turnover, parts shortages and inflation, particularly on fixed-price contracts that it won last decade with bids that were near break-even.

The company took a $257 million accounting charge after indefinitely delaying the first crewed flight of its Starliner spaceship, bringing its total overruns for the years-late capsule to more than $1.3 billion. Defense division performance was also crimped by new charges for a T-7 training jet and MQ-25 aerial refueler.

Ken Herbert, an analyst with RBC Capital Markets, attributed Boeing’s strong results to strong top-line growth as commercial jet sales and deliveries grow.

The defense unit’s results were worse than he had expected, with its profit margin tumbling to negative 8.5% from a 1.1% gain a year earlier. “No one’s going to care when the commercial business is throwing off the cash it’s throwing off,” Herbert said in an interview.

Airbus and Boeing have struggled to restore pre-COVID production rates as they grapple with inexperienced workers and shortages of microelectronics, seats and other parts. Even so, demand is booming for new, fuel-efficient jetliners and the plane makers are enjoying their largest sales hauls in years.

In June, Boeing sealed a 290-plane order from Air India, and secured second-quarter deals with Ryanair and Saudi start-up Riyadh Air, among others. Deposit payments tied to these mega-orders boosted cash flow, Calhoun told CNBC.

Cash and marketable securities fell by $1 billion during the quarter to $13.8 billion as Boeing paid down total debt to $52.3 billion from $55.4 billion in March.

The company remains on track to generate between $3 billion and $5 billion in cash this year. Boeing also affirmed its target of delivering 400 to 450 of the 737 narrowbodies, and 70 to 80 Dreamliner widebodies.

Boeing delivered 136 jets during the second quarter – 21% more than analysts projected – while inspecting and repairing 737s and 787s for defective supplier parts and contending with the strike at Spirit, its largest supplier.

“We have more work ahead to improve performance, but our progress is clear and we’re confident in our path forward,” Calhoun said in the message to employees.