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01/09 22:53
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call highlights a mix of positive and negative factors. The $4.9 billion charge for the 777X program and delays in certification are significant negatives. The Q&A reveals further concerns about cash flow and certification delays. While there are positive elements like improved operating margins and strategic production increases, the financial burden and uncertainties weigh heavily. The lack of clear guidance on cash flow targets and production challenges further dampen sentiment, leading to a negative outlook for the stock price over the next two weeks.
Revenue Revenue was up 30% to $23.3 billion, primarily driven by improved operational performance across the business, including higher commercial deliveries and defense volume.
Core Loss Per Share Core loss per share of $7.47 primarily reflects the $6.45 impact of the $4.9 billion charge on the 777X program.
Free Cash Flow Free cash flow was positive $238 million in the quarter, primarily reflecting higher commercial deliveries and working capital that improved compared to both the prior year and the prior quarter. This was the first positive free cash flow quarter since the fourth quarter of 2023.
Boeing Commercial Airplanes Revenue Revenue was up nearly 50% to $11.1 billion, primarily reflecting higher deliveries compared to last year.
Boeing Defense, Space & Security Revenue Revenue grew 25% to $6.9 billion on improved operational performance and higher volume.
Boeing Global Services Revenue Revenue was up 10% to $5.4 billion, primarily reflecting improved commercial and government volume.
Operating Margin for Boeing Commercial Airplanes Operating margin of negative 48.3% was impacted by the charge on the 777X program.
Operating Margin for Boeing Defense, Space & Security Operating margin of 1.7% was up significantly compared to last year, reflecting better operating performance in the third quarter.
Operating Margin for Boeing Global Services Operating margin was 17.5% in the quarter, up 50 basis points compared to last year, driven by favorable commercial volume and mix.
777X Program Charge A $4.9 billion noncash charge was recorded during the quarter due to delays in certification and first delivery, now expected in 2027. This charge includes customer concessions, incremental rework costs, learning curve adjustments, and carrying costs of production operations spread over a longer period of time.
737 production increase: Production increased to 42 airplanes per month after stabilizing at 38 per month. Future rate increases will be in increments of 5, with breaks of at least 6 months.
787 production and expansion: Production stabilized at rate 7, with plans to increase to 8 per month. Investments are being made in South Carolina to meet market demand.
777X program delay: First delivery delayed to 2027, resulting in a $4.9 billion noncash charge. Certification and production schedules have been reset.
737-7 and -10 certification: Certification expected in 2026 after addressing engine anti-ice issues.
Backlog growth: Backlog exceeds $600 billion, with more than 5,900 airplanes, including strong demand for 737 and 787 models.
Defense contracts: Secured $2.8 billion U.S. Space Force contract and $2.7 billion PAC-3 seeker production contracts.
Operational efficiencies: Achieved a 75% reduction in traveled work on 737 and 60% across all airplane programs. Positive free cash flow generated for the first time since 2023.
FAA delegation: FAA granted limited delegation to issue airworthiness certificates for 737 MAX and 787 airplanes.
Culture change: Focus on safety, quality, and employee engagement through new values and behaviors. Plans for another employee survey to assess progress.
Digital business sale: Sale of Jeppesen and other digital business segments on track, while retaining capabilities related to fleet maintenance and operations.
777X Program Delays: The certification and first delivery of the 777X program have been delayed to 2027, resulting in a $4.9 billion noncash charge. This delay is due to longer-than-expected certification processes and has led to increased costs, customer concessions, and production disruptions.
737-7 and -10 Certification Challenges: Certification for the 737-7 and -10 programs is delayed until 2026 due to ongoing design updates to address engine anti-ice issues. This delay impacts production timelines and delivery schedules.
IAM Workforce Strike: The IAM workforce strike in St. Louis has disrupted production, requiring contingency plans to maintain operations. This situation poses risks to production stability and customer commitments.
Supply Chain Stability: While improvements have been noted, supply chain stability remains a critical focus area, particularly as production rates increase for the 737 and 787 programs.
Defense Program Risks: Fixed-price development programs in the defense segment continue to face execution risks, although progress has been made in stabilizing these programs.
Economic and Regulatory Uncertainties: The company faces ongoing economic uncertainties and regulatory hurdles, particularly in relation to FAA certification processes and global market conditions.
737 Production Rates: Boeing plans to increase 737 production rates to 42 airplanes per month, with further rate increases beyond 42 to occur in increments of 5. These increases will not happen earlier than 6 months apart and will depend on achieving stability and readiness.
787 Production Rates: The 787 program aims to move to a production rate of 8 airplanes per month in the near future, following a successful rate 8 Capstone review with the FAA. Boeing is also investing in the expansion of its South Carolina site to meet exceptional market demand.
777X Certification and Delivery: The first delivery of the 777-9 is now expected in 2027, delayed from the previous expectation of 2026. Boeing has accumulated over 4,000 flight hours for the program and plans to complete the certification process within the revised schedule.
737-7 and 737-10 Certification: Certification for the 737-7 and 737-10 is anticipated in 2026, following progress on design updates to address the engine anti-ice issue.
Defense Business Outlook: Boeing's defense business is positioned for growth, supported by a record backlog of $76 billion and strong demand driven by the global threat environment. The company expects the defense segment to return to historical performance levels as it transitions to new contracts with tighter underwriting standards.
Free Cash Flow Outlook: Boeing expects positive free cash flow in the fourth quarter of 2025, barring any impact from a prolonged government shutdown. The company has updated its 2025 outlook to a free cash flow usage of about $2.5 billion, reflecting higher-than-expected performance year-to-date.
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The earnings call summary presents a mixed picture. Positive aspects include increased production rates for 737 and 787, a $2.8 billion contract with the U.S. Space Force, and expected positive free cash flow by 2025. However, delays in 737 MAX certification, reliance on a favorable global trade environment, and potential production impacts due to lower-grade stockpiles next year temper enthusiasm. The Q&A section reveals management's lack of clarity on several issues, further contributing to a neutral outlook. Given these factors, the stock price is likely to remain stable in the short term.
The earnings call highlights a mix of positive and negative factors. The $4.9 billion charge for the 777X program and delays in certification are significant negatives. The Q&A reveals further concerns about cash flow and certification delays. While there are positive elements like improved operating margins and strategic production increases, the financial burden and uncertainties weigh heavily. The lack of clear guidance on cash flow targets and production challenges further dampen sentiment, leading to a negative outlook for the stock price over the next two weeks.
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