Boeing’s third-quarter results have drawn attention after the company reported a significant accounting charge, leading to a decline in its stock price. The aerospace giant achieved a revenue increase of 30%, reaching $23.3 billion on the back of 160 jet deliveries, marking its highest output since 2018. The positive trend extended to cash flow, with free cash flow turning positive at approximately $200 million and operating cash flow at $1.1 billion. Despite these gains, a pre-tax charge of $4.9 billion related to delays in the Boeing 777X program resulted in a net loss per share.
The company confirmed that the production rate of the Boeing 737 has stabilized at 38 aircraft per month. Anticipated approval from the Federal Aviation Administration (FAA) could allow this figure to rise to 42 per month by the end of March 2024. Boeing’s total backlog, which now stands at $636 billion, reflects a strong demand outlook, although the ongoing delays with the 777X continue to exert pressure on overall earnings.
Key Performance Drivers and Financial Implications
Boeing’s notable revenue performance was largely driven by a surge in commercial aircraft deliveries, which increased by approximately 385 units year-on-year. This led to a 49% rise in revenue for Boeing Commercial Airplanes, totaling $11.1 billion. Meanwhile, the Defense and Global Services segments also experienced growth, with increases of around 25% and 10%, respectively. Despite the positive growth in these sectors, the company faced a loss due to the significant charge associated with the 777X, which added $6.45 per share to the overall loss.
The ability to generate positive free cash flow, even in modest amounts, is an important milestone for Boeing as it works to repair its balance sheet after a period of substantial cash burn. The company maintained $23 billion in cash reserves, supported by improved working capital and factory efficiency. The FAA’s recent approval to increase Boeing 737 MAX production is expected to enhance cash generation and liquidity.
Looking Ahead: Fourth Quarter Expectations
As Boeing heads into the fourth quarter, investors should closely monitor production rates, the ongoing costs associated with the 777X program, and the management of working capital. The company has the potential for modest sequential delivery gains, contingent on supplier performance, which could bolster operating cash flow. The stability of the Boeing 787 program is also expected to support consolidated margins.
However, the delay in the 777X program presents challenges that could hinder near-term earnings recovery, even as revenue growth continues. Boeing’s management is focused on stabilizing production programs and converting its sizable backlog into revenue. The company’s growth trajectory will heavily depend on its ability to maintain cash discipline and navigate ongoing expenses related to development and interest.
In summary, while Boeing’s Q3 results reflect operational improvements and a strong market demand, the substantial charges tied to the 777X program will require careful attention as the company works to enhance its financial health and restore investor confidence.
