Overlooked Aspects of Boeing's Significant Quarterly Loss in Q4
It's been about a week since Boeing (BA -0.46%) reported its Q4 earnings, and, surprisingly, things seem to be looking up. Despite the company posting GAAP net losses of $5.46 per share in Q4 and a staggering $18.36 for the year, Boeing shares saw a surge in optimism. The stock price climbed higher in fits and starts, ultimately closing $10 above its pre-earnings price by the end of the week.
But is this optimism justified? Let's dive into the details.
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Breaking down Boeing's losses
perked up on hopes that the worst news may now be in the rearview mirror. Last week, Boeing shares continued to move higher in fits and starts, finally closing Thursday about $10 above their pre-earnings price.
To an extent, the answer depends on how you interpret the numbers. Boeing's Q4 losses were mainly due to the IAM work stoppage and agreement, as well as the resulting workforce reductions. However, it's important to note that not all of Boeing's losses were due to external factors. Some were a consequence of poor business decisions.
negative free cash flow of $4.1 billion for the quarter and $14.3 billion for all of 2024, an amount even greater than its reported full-year net loss of $11.8 billion.
Take, for example, the Boeing Defense, Space & Security (BDS) division. BDS suffered losses of $2.3 billion last quarter, largely due to charges for certain defense programs and underbidding on Pentagon contracts. BDS isn't the only troubled area for Boeing. The Commercial Crew program, which involves the company's Starliner space capsule, continues to face issues, contributing to the company's losses.
brought on by the IAM strike.
Despite these challenges, Boeing's Global Services aircraft maintenance business is holding its own, with revenues growing 6% in Q4 and operating margins improving. However, even this segment isn't immune to Boeing's woes, with revenue growth remaining modest.
without glitching one way or another.
Some good news for Boeing
Commercial Airplanes, the division investors are most focused on, saw some positive news post-earnings. With the IAM strike now over, Boeing is effectively restarting production of its 737 MAX airliners at a rate of 38 planes per month, up from 33 planes in January. The company also anticipates increasing production rates further in the future.
Boeing did have some good news to report. With the IAM strike out of the way, Boeing is "executing a methodical plan to restart our factories."
However, it's crucial not to overlook the problems at BDS. Boeing warned that the significant charges taken at BDS in Q4 will result in decreased cash flow in the next few years. With BDS accounting for more than $1 out of every $3 in Boeing's revenue, this is not good news for the company's future profits or stock price.
post-earnings conference call with analysts that it has sufficient parts in inventory to sustain production of its 737 MAX airliners at a rate of 38 planes per month, up from 33 planes in January. And it sees a path to accelerate production beyond that rate. CEO Kelly Ortberg says the supply chain for Boeing's 787 airliners, too, is "stable" and the company is anticipating a production rate increase there as well.
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bad news for Boeing's business going forward, and for Boeing stock as well.
Boeing's financial struggles can be attributed to several main factors:
- Production Delays and Supply Chain Issues: Delays in the 787 Dreamliner program and ongoing supply chain constraints have severely impacted Boeing's ability to meet production targets.
- Labor Disputes: A machinist strike on the U.S. West Coast halted production, setting back delivery targets.
- Regulatory Scrutiny and Safety Concerns: The 737 MAX program faced intense scrutiny, increasing regulatory oversight and further delays.
- Competition from Airbus: Airbus has capitalized on Boeing's challenges, increasing market share.
Despite these challenges, analysts forecast a turnaround to profitability by 2025–2026, driven by expected certifications of new aircraft models like the 737 MAX 7/10 and 777X. Boeing's new CEO is focused on restoring the company's engineering culture, quality control, and on-time deliveries, aiming to improve execution and bolster profit margins. Upcoming defense programs can also add incremental growth. However, ongoing manufacturing issues and declining confidence in product safety could potentially pull back on the stock's rise to $200 per share, as some analysts caution.
- In regards to Boeing's financial performance, analysts are considering both internal issues and external factors, such as poor business decisions and external factors like the IAM work stoppage.
- To justify the surge in optimism for Boeing shares, investors are looking at the company's Q4 earnings transcripts, focusing on the potential for improved production rates for the 737 MAX airliners.
- Despite the optimism surrounding Boeing's Commercial Airplanes division, investors should be aware of the significant charges taken at the Boeing Defense, Space & Security (BDS) division, which has contributed to negative free cash flow and may impact the company's future profits and stock price.
- During the post-earnings conference call with analysts, Boeing confirmed that it has sufficient parts in inventory to sustain production of its 737 MAX airliners at an increased rate, indicating a positive outlook for the division in the near future.