Boeing
will report third-quarter earnings Wednesday morning. The company’s results have been notably hard to predict in recent years. Investors should focus on cash flow.
Coming into the third-quarter report,
Boeing
(ticker: BA) has missed Wall Street estimates 14 times out of the past 18 quarters. That stretches back to early 2019, around the time of the second fatal 737 MAX crash that led to the worldwide grounding of the jet between March 2019 and November 2020.
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.
Predicting Boeing’s third quarter isn’t an easy call. Lately, Boeing has had trouble ramping up production of its 737 MAX jets, partly due to supplier problems—which Boeing is directly addressing. That is weighing on Wall Street’s near-term estimates.
“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.
The Spirit Aero problem is another thing investors have to factor into third-quarter numbers. Analysts now project a per-share loss of $3.18 for the third quarter. A few weeks back, that number was a loss of about 50 cents. Boeing lost 82 cents a share in the second quarter.
Whether estimates have come down enough to create a so-called earnings beat is hard to say.
Performance from Boeing’s defense business has been uneven recently too: It reported operating losses in seven of the past nine quarters, according to FactSet. Wall Street is projecting another loss for the third quarter. Inflation and fixed-price contracts are part of the problem.
What investors will most likely want to see is some progress along three lines: Fixing defense profitability, commercial jet production, and free cash flow.
The last item will be key for investors. Boeing currently projects 2023 free cash flow between $3 billion and $4 billion. In the first half of 2023, Boeing has generated some $1.8 billion in free cash flow.
Management hosts a conference call at 10:30 a.m. ET to discuss results. There will be a lot to discuss.
Through Tuesday’s close, Boeing stock has climbed 24% over the past 12 months, while the
S&P 500
and
Dow Jones Industrial Average
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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