Boeing
reported a wider-than-expected third-quarter loss. No one should be shocked. It’s amazing just how bad results have been over the past 19 quarters.
Boeing (ticker: BA), on Wednesday, announced a third-quarter loss of $3.26 per share on sales of $18.1 billion. Wall Street had expected a loss of $3.18 a share on sales of $18 billion, according to FactSet.
The operating loss in the company’s defense business was $924 million, while Wall Street was looking for a loss closer to $400 million.
“Defense stinks it up again,” wrote Vertical Research Partners analyst Rob Stallard in a Wednesday report. The third quarter issue was another change on a fixed-price contract, this time it’s the Air Force One replacement. Fixed price contracts amid higher than expected have hurt the division’s results for years.
Over the past 19 quarters, which stretches back to the first quarter of 2019 when the 737 MAX was grounded worldwide after a second deadly crash, Boeing’s defense business has made a total operating profit of $474 million on sales of $120 billion for a margin of 0.4%.
The commercial aerospace division has done much worse. It has lost $31 billion over that span on sales of $117 billion.
It’s been tough three-plus years, to say the least, owing mostly to the MAX problems and COVID-19. The current quarter is another earnings miss, the company’s 15th out of the past 20 quarters. It’s hard to call it a record, but companies just don’t miss that often. Even the volatile
Tesla
(TSLA) has missed Wall Street’s quarterly earnings estimates only 13 times in the past 10-plus years.
Despite the miss, Boeing reaffirmed its guidance for free cash flow of between $3 billion and $5 billion in 2023. That’s a positive, and investors are simply used to weak results. Boeing stock was initially up 3.7% shortly after the results were released. Shares ended Wednesday down 2.5%. The
S&P 500
dropped 1.4%, and the
Dow Jones Industrial Average
declined 0.3%.
Boeing used about $300 million in the third quarter and has generated a positive free cash flow of about $1.5 billion in the first nine months of 2023. Free cash flow has to be roughly $1.5 to $3.5 billion in the fourth quarter to hit guidance.
Deliveries guidance for 737 MAX jets was reduced to 375 to 400 airplanes for all of 2023, down from a prior range of 400 to 450, but investors already know about supplier quality problems that have led to weak delivery rates.
“Seventy 737 deliveries in third quarter 2023 is the lowest quarter since third quarter 2021,” wrote J.P. Morgan analyst Seth Seifman in a preview report. That’s “partially due to [
Spirit AeroSystems
‘] manufacturing error.”
Boeing recently agreed to restructure some agreements with Spirit Aero (SPR) to help the supplier overcome recent issues and improve production stability. Spirit Aero supplies sections of the fuselage for several Boeing jets.
Despite Spirit Aero’s problems, Boeing reaffirmed its goal to ramp MAX production to 38 a month by the end of 2023.
Coming into Wednesday trading, Boeing shares have fallen about 15% over the past three months. Boeing stock has climbed 24% over the past 12 months, while the S&P 500 and Dow have risen about 10% and 4%, respectively. For investors, an improving commercial aerospace outlook has outshined a lot of Boeing’s internal issues.
Write to Al Root at [email protected]
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