Boeing
stock was up in midday trading. The company’s earnings report came in better than expected for the fourth quarter.
The release is only part of the story, though. The list of things investors were watching for in Boeing’s fourth-quarter report and conference call was as long as a trip around the world in economy class without in-flight entertainment.
The 737 MAX jet, production quality, new regulatory oversight, commercial aerospace recovery, new jet approvals, and defense business profit margins were all on the docket for discussion.
For the fourth quarter, Boeing reported a per-share loss of 47 cents on sales of $22 billion. Free cash flow was $3 billion. Wall Street called for a loss of 76 cents a share on sales of $21.1 billion, according to Bloomberg. Analysts had projected free cash flow of $2.1 billion.
A year ago, Boeing lost $1.75 a share on sales of about $20 billion.
Boeing shares were up 6% in midday trading Wednesday while the
S&P 500
and
Nasdaq Composite
were down about 0.8% and 1.5%, respectively.
Coming into Wednesday trading, Boeing stock has declined about 20% since an emergency door-plug failure on a MAX 9 jet operated by
Alaska Air
on Jan. 5. The S&P 500 and Nasdaq Composite have risen about 4% and 6%, respectively, over the same span.
“We must simply be better,” said CEO Dave Calhoun on the conference call. “Our customers deserve better.”
Calhoun gave a list of things done since the incident to improve quality, including opening up 737 production to additional oversight, hiring a third-party quality expert, and stopping production to review quality with all associates.
Boeing’s commercial airplane business made an operating profit of $41 million. That’s small, but it’s something. That business has lost billions while it continues to recover from the Covid-19 pandemic and the worldwide MAX grounding that lasted from March 2019 to November 2020.
“Back in black,” wrote Vertical Research Partners analyst Rob Stallard in a Wednesday note. The overall operating profit of $283 million was “significantly ahead of our estimate.” He rates Boeing stock at Hold with a $245 price target.
Boeing delivered 157 aircraft in the fourth quarter, including 107 MAX jets, compared with 152 jets, including 107 MAX planes, in the fourth quarter of 2022. For the full year, Boeing delivered 528 planes, including 387 MAX jets, up from 480 planes, including 374 MAX jets, in 2022.
For 2024, Wall Street projects about 530 jets delivered. Boeing isn’t giving 2024 financial guidance. In the recent past, Boeing gave some guidance about free cash flow and jet deliveries.
Suspending guidance makes sense given recent MAX troubles. Increased regulatory oversight in the aftermath of the incident will impact production rates and the approvals of two other versions of the MAX jet—the shorter MAX 7 and the longer MAX 10.
The Jan. 5 incident left a hole in the side of the plane and forced an emergency landing. The regulator’s immediate response was to ground MAX 9 jets. The planes are now allowed to fly again, once they are inspected and any problems found are corrected.
The Federal Aviation Administration also has said it won’t approve a MAX production increase until it is satisfied with Boeing’s manufacturing and quality control processes. Boeing wants to start producing more MAX jets to meet higher demand. Its goal was to take MAX production up from about 38 a month to 50-plus in a couple of years.
Calhoun added in his conference call remarks that Boeing wouldn’t predict when production rates would move higher.
Boeing is currently making 38 MAX jets a month. Deutsche Bank analyst Scott Deuschle said that was “better than some had feared” in a Wednesday note. He rates Boeing stock at Buy with a $295 price target.
For 2024, Wall Street is looking for about $5.8 billion in free cash flow. Full-year 2023 free cash flow came in at $4.4 billion, roughly $900 million better than analysts projected.
Coming into the report, Boeing’s defense business has lost money in three of the past four quarters. Fixed-price contracts and high inflation have squeezed profitability at defense contractors recently. Investors will want to see signs of stabilization there.
The defense business lost another $101 million in the fourth quarter.
Options markets implied the stock would move about 4%, up or down, following earnings. Shares have moved an average of about 3%, up or down, following the past four quarterly reports. Shares have risen three times and fallen once.
Write to Al Root at [email protected]
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