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Boeing said it will miss its target for 737 Max deliveries this year and will also absorb nearly $800 million in costs in its defense business, including its high-profile program to build Air Force One.
The aircraft maker reported a third-quarter net loss of $1.6 billion on revenue of $18.1 billion. Adjusted operating loss of $3.26 per share beat Wall Street’s expectation of $3.18.
Chief Executive David Calhoun said in a memo to employees that Boeing “despite the challenges we faced in the third quarter” following the grounding of the Max in 2019 following two fatal crashes and the decline in demand for jets on the way Recovery remained during the Covid-19 pandemic.
“Nevertheless, we still have a lot to do,” he added.
The company will deliver between 375 and 400 Max jets in 2023. The narrow-body jet makes up a significant portion of Boeing’s sales volume and was targeting 400 to 450 deliveries earlier this year before two separate quality defects were discovered in the fuselages supplied by Kansas: based on Spirit AeroSystems.
Although aerospace manufacturers get most of their cash when they deliver planes to customers, Boeing reiterated its cash forecast for the year. The company still plans to generate $3 billion to $5 billion in free cash this year – the metric investors typically use to evaluate the stock – but the final figure will be at the lower end of that range, Chief Financial Officer Brian said West.
Baird analyst Peter Arment said that while Boeing’s results reflected a “weaker performance” in the third quarter, the reaffirmation of the company’s free cash flow forecast “should support a positive reaction to the stock.”
Boeing shares rose a little more than 1 percent to $184.65 in midday trading.
The amount of work required to repair the defect in the 737’s rear pressure bulkhead is greater than Boeing originally estimated. The company has made its quality processes more sophisticated, Calhoun said, and “as a result, we are finding problems that we need to solve.”
“These are not new flaws in the system,” he said. “Instead, thanks to the culture we are building, we have identified deviations from the past that we are now determined to find and fix once and for all.”
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Boeing’s plans to increase production remain unchanged. Construction of four 787s per month will increase to five, reaching 38,737 per month by the end of the year.
The group’s defense business reported a loss of $924 million, which TD Cowen analyst Cai von Rumohr described as a “massive” deficit. The segment posted a loss of nearly $1.7 billion this year after losing $3.5 billion in 2022.
The defensive results in the third quarter were “disappointing,” West said. “We are not as far along in this recovery as we expected at this point.”
Boeing lost $482 million on Air Force One in the third quarter due to higher manufacturing costs, resolving negotiations with a supplier and difficulty staffing a project that requires workers with specialized skills and security clearance.
The company struggled to build the presidential plane under a fixed-price contract. The cost was originally estimated at $5 billion, but former President Donald Trump cajoled the plane maker, now X, on Twitter until Boeing agreed to cut prices.
The increased cost of the program also forced Boeing to pay a $315 million satellite contract fee.
West said Boeing is seeking to improve margins by improving employee training and no longer entering into fixed-price development contracts.
But as war rages in Ukraine and the Middle East, Calhoun told CNBC on Wednesday: “Given what’s going on in the world, given the need to rebuild the supply chain – these stores need to be replaced, and they have.” .” grow – the forecast for our arms business. . . becomes more robust every day.”