Boeing’s third-quarter results for 2023 showcased significant growth in revenue alongside a substantial accounting charge that negatively impacted its net earnings. The aerospace giant reported revenues of $23.3 billion, marking a 30% increase driven by 160 jet deliveries, the highest quarterly output since 2018. Free cash flow turned positive at approximately $200 million, with operating cash flow reaching $1.1 billion.
Despite these positive indicators, Boeing faced a pre-tax charge of $4.9 billion related to delays in the Boeing 777X program, postponing its first delivery to 2027. This charge significantly affected the company’s net earnings per share. Management noted that production output for the Boeing 737 has stabilized at 38 aircraft per month, with potential increases to 42 aircraft per month pending approval from the Federal Aviation Administration (FAA).
Financial Overview and Key Performance Indicators
Boeing’s performance this quarter reflected robust demand for its commercial aircraft, as evidenced by the 160 deliveries, which is an increase of 385 units year-on-year. This surge pushed revenue for Boeing Commercial Airplanes up by 49%, reaching $11.1 billion. Other segments, including Boeing Defense and Global Services, also reported growth of around 25% and 10%, respectively.
However, the substantial charge linked to the Boeing 777X program resulted in negative earnings per share, which included an added loss of $6.45 per share. The positive cash flow metrics, alongside stable cash holdings of $23 billion, showcase Boeing’s recovery trajectory after previous challenges with cash burn.
The FAA’s recent approval to increase Boeing 737 MAX production to 42 aircraft per month signals further operational enhancements that could support cash generation. Despite the positive revenue figures exceeding external estimates, the sizeable charges have tempered overall investor sentiment.
Implications for Future Performance
Boeing’s ability to generate positive free cash flow, though modest, is a crucial step towards repairing its balance sheet. Positive operating cash flow and stable liquidity position the company to maintain funding flexibility in the near term, even as capital expenses evolve into profitable investments. The delay in the Boeing 777X program resets expectations, extending the timeline for margin improvements and keeping margins depressed for Boeing Commercial Airplanes in the short term.
The increase in production capacity for the Boeing 737 and steady output of the Boeing 787 at 7 aircraft per month is likely to enhance overall working capital efficiency. The company’s service margins, currently at 17.5%, contribute to a more stable earnings mix. Boeing’s backlog has reached $636 billion, representing over 5,900 aircraft, and provides a solid foundation for multi-year revenue growth.
Looking ahead to the fourth quarter, investors should monitor Boeing’s production cadence, developments in the Boeing 777X program, and working capital management. The recent approval to increase production of the Boeing 737 provides opportunity for gradual delivery growth, contingent upon supplier performance. While the stability of the Boeing 787 program may bolster consolidated margins, the ongoing costs associated with the Boeing 777X delay pose challenges to near-term earnings recovery.
Management remains focused on stabilizing production programs and converting the extensive backlog into revenue. The overall growth trajectory will depend on maintaining cash discipline, with free cash flow, order acceptance, and cost absorption being critical components. Earnings per share will continue to be influenced by development expenses and interest costs, while future upside hinges on effective execution and supply chain reliability.
