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Thursday Apr 25 2024 13:56
5 min
Boeing's first-quarter results beat Wall Street forecasts, initially boosting the stock before it declined as investors considered the company’s ongoing challenges.
The aerospace giant reported a loss of $1.13 per share on revenues of $16.6 billion, better than analysts' expectations of a $1.73 per-share loss and $16.3 billion in sales, according to data cited by Bloomberg. Free cash flow was negative $3.9 billion, exceeding forecasts of negative $4.4 billion.
A year earlier, Boeing had reported a loss of $1.27 per share on revenues of $17.9 billion, with free cash flow at negative $800 million.
Revenue from the commercial airplane segment fell to $4.7 billion from $6.7 billion the previous year, with the company delivering 83 planes in the quarter, down from 130. The division's operating loss widened to $1.1 billion from a loss of $615 million a year ago.
Boeing’s defense segment reported a positive operating profit of $151 million — a substantial $363-million improvement from the the $212 million loss reported in the same quarter last year.
Despite these mixed results, Boeing stock closed down 2.9% at $164.33, against a flat performance by the S&P 500 and a slight 0.1% gain by the Nasdaq Composite.
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In a report cited by Barron’s, Vertical Research Partners analyst Rob Stallard wrote:
“If there has been one thing that has been consistent about Boeing over our many years of covering the company it has been its hopelessly optimistic timetables for improvement. We think this will again be the case with what has been set out today, with management seemingly nonchalant about the regulatory, political, legal, contractual, customer, competitive, supply chain, and internal employee pressures that it faces.”
In March, CEO Dave Calhoun announced his plan to step down at the end of the year, though no successor has yet been named. Boeing indicated on its earnings call that a new chief executive is not expected to be appointed in the next month or two.
In a recent note, analyst Sheila Kahyaoglu of Jefferies suggested that the new CEO should abandon Boeing's ambitious target of $10 billion in annual free cash flow by 2026. The goal creates unnecessary expectations, she wrote on April 21:
“External pressures from the financial community (including ourselves) are not helpful when safety is paramount.”
She also recommended committing to a new medium-sized single-aisle aircraft — a step the current CEO has not taken since his tenure began in early 2020.
Furthermore, production rates for the 737 MAX were a topic of discussion on the earnings call. The rate has been reduced following an incident in January when an emergency-door plug blew out during flight on a 737 MAX 9, leading to increased oversight by the Federal Aviation Administration and financial compensation to airlines.
Boeing still aims to increase production to 50 units per month over the next few years, currently limited to 38 per month pending FAA approval of manufacturing quality.
In report on Wednesday cited by Barron’s CFRA analyst Stewart Glickman wrote:
“Boeing is saying all the right things about a return to quality and a safety-first approach to manufacturing, but we think continued adherence to a goal of 50 units/month on the 737 MAX, now by late 2026, is still going to be very difficult”.
While Boeing grapples with significant quality and production issues, the earnings beat offers a temporary respite for a company that had missed analysts' expectations in 14 of the last 19 quarters since the 737 MAX was globally grounded in 2019 after two fatal crashes.
At the time of writing on April 25, Boeing stock was down 0.875 in premarket trading at $162.90. The company’s shares, which trade under the BA ticker on the NYSE, are down close to 37% so far this year.
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Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.
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