Boeing reported an operating loss of $650 million in the fourth quarter, surprising Wall Street analysts who had expected the aircraft giant to turn a profit.
The company blamed the unexpected loss on “extraordinary production costs” as it attempted to deliver the remaining 737 MAX jets and ramp up deliveries of the 787 Dreamliner. The company’s production of the 787 remains below normal rates.
Furthermore, Boeing had to cash out an unspecified amount of compensation to 787 customers whose deliveries were delayed by nearly a year.
Boeing has reported just two quarters of profit in the nearly four years since the 737 Max was retired. After two fatal crashes that killed 346 people, the aircraft was grounded for 20 months starting in March 2019. Then, a year later, the pandemic nearly halted demand for flying and new aircraft — leading to hundreds of aircraft orders being cancelled. Accumulating losses for Boeing.
However, the industry showed signs of recovery, and analysts surveyed by Refinitiv predicted that Boeing would earn 26 cents per share. Instead, it recorded a loss of $1.75 per share. So while this is an improvement from the $7.69 per share loss in the fourth quarter of 2021, it’s also a huge disappointment.
Boeing’s troubles in the fourth quarter relate to its tough few years since the 737 Max crisis.
First, the company was saddled with an excess inventory of hundreds of aircraft. Boeing usually does not keep inventory, as aircraft are delivered to customers shortly after completion.
But even though the 737 Max wasn’t delivered during the grounding process, Boeing continued to build them — in part to keep its suppliers in business. Then it had to look for new buyers for some of those planes due to customers canceling orders during the pandemic.
Beyond the limit, the FAA has cited quality issues with the company’s 787 Dreamliners that have prevented it from offering this model. Although the Dreamliner isn’t as grounded as the Max, it still affects the company: CEO Dave Calhoun said in an interview on CNBC Wednesday that a lot of Boeing’s unusual production costs last quarter were the result of having to rework both Max and Dreamliner jets.
Supply chain problems are improving, Calhoun added, but they aren’t behind the company or the airline industry as a whole, and he suggested more money-losing quarters may be ahead despite a recovery in demand, saying he expects Boeing to have “bouncy” margins over the course of the year. The year the Max and Dreamliner stocks are liquidated.
Boeing delivered 152 commercial aircraft in the quarter, up 54% from a year ago and better than its own target.
But digging into the financial results highlights a potential problem: Boeing appears to have received lower prices on some of its planes than analysts expected.
That’s because the company’s revenue fell short of expectations, coming in at just under $20 billion. While it was Boeing’s highest revenue figure since the start of the pandemic, it was about $360 million short of analyst estimates. The combination of better-than-expected deliveries and worse-than-expected revenue indicates poor pricing.
Boeing tried to make the best of its disappointing results.
The company noted that this is the first full year of positive operating cash flow since the beginning of the 737 Max crisis. Boeing finally brought in $3.5 billion more cash than it spent, and the company reaffirmed guidance for 2023 with positive operating cash flow of $4.5 billion to $6.5 billion.
“Demand in our portfolio is strong, and we remain focused on driving stability in our operations and within our supply chain to meet our commitments in 2023 and beyond,” Calhoun said in the company’s statement. “While challenges remain, we are well positioned and on track to restore our operational and financial strength.”
Boeing (BA) shares were down 2.5% in morning trade.
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