Boeing protects cash target while cutting delivery goal on 737
Boeing Co. maintained its cash-flow target and said it’s moving ahead with higher aircraft output, reassuring investors even as manufacturing defects forced the company to lower its annual delivery goal for the top-selling 737 model.
Shares of the biggest U.S. exporter rose as much as 3.5% after Boeing maintained its goal of $3 billion to $5 billion in free cash flow this year and affirmed plans to more than double cash generation by middecade.
The company also kept its delivery target for the 787 widebody.
The upbeat financial outlook helped investors look past the issues afflicting the 737 single-aisle aircraft that’s suffered from several quality shortcomings.
As a result of required repair work, Boeing cut its delivery goal for the plane and expects to hand over 375 to 400 units.
Already a month ago, executives had cautioned that deliveries would be at the low end of a set range.
Boeing has experienced a stop-and-start comeback from the pandemic, often frustrating investors and customers at a time when demand for new jets is booming.
In a message to employees, Chief Executive Officer Dave Calhoun said “it’s on us to perform,” highlighting how the company has struggled to increase production as it struggles with quality lapses at it’s largest suppliers.
“When we set our recovery plans, we knew issues would come up along the way,” Calhoun said in the memo. “This is a complex long-cycle business and enduring change takes time.”
Increasing output
Boeing has been working since midyear to produce 737 at a steady tempo of 38 jets per month and said on Wednesday it expects to complete the transition to the higher pace by year-end.
Boeing is also moving in on its target of assembling five of the twin-aisle Dreamliners per month by the close of the year, the company said.
It plans to double production of the carbon-composite 787 to a 10-jet monthly pace over the next two to three years to keep pace with booming sales.
“While Boeing has walked down elements of its 2023 guidance, it is hanging on by its fingernails to that FCF guide,” said Robert Stallard of Vertical Research Partners, referring to the company’s free cash flow.
“Given the various moving parts, we think investors will be focused on whether some of these 2023 issues drag on into next year, and what the implications are for 2024-26 cashflow forecasts.”
The biggest U.S. exporter reported its ninth consecutive money-losing quarter, posting an adjusted loss of $3.26 cents a share.
That that was worse than the $2.95 shortfall expected by analysts, according to estimates compiled by Bloomberg.
Before Wednesday, Boeing’s stock had lost about 4.3% this year, compared with a 13% gain at European rival Airbus SE.
The company’s income was dented by the supplier snarls that caused 737 deliveries to plunge by a third from the previous quarter.
Losses at the defense subsidiary included a charge of $482 million to kit out the next Air Force One presidential aircraft.
The company burned through $310 million in free cash in the third quarter, while analysts estimated its outflow would be $252 million.
Investors will be looking for more details around inspections and repairs needed for the aft pressure bulkhead in some 737 Max jets, the latest production glitch uncovered at Spirit AeroSystems Holdings Inc., when Boeing hosts an earnings call later Wednesday.