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Boeing’s earnings Flight as air travel recovers

by SuperiorInvest

Key things

  • Boeing is expected to report fourth-quarter adjusted earnings of 41 cents per share on Jan. 24.
  • Shares have risen more than 70% since the end of September on the back of a recovery in global air travel.
  • The company is generating cash again and expects free cash flow of $3 billion to $5 billion in 2023.
  • Deliveries of commercial aircraft rose in 2022 despite supply chain problems, while Boeing’s defense unit suffered a $2.8 billion loss in the third quarter.

Aircraft manufacturer Boeing (B.A), riding a recovery in global travel, will report fiscal fourth-quarter earnings with cash flow and share price on the rise, and analysts predict the first profitable quarter in six.

Boeing, the world’s second-largest supplier of commercial aircraft, is expected to post adjusted net income of 41 cents a share when it reports ahead of trading on Jan. 25, according to estimates compiled by Visible Alpha. The company reported losses per share of $7.69 a year earlier and $15.25 in the final quarter of 2020.

Boeing’s operations have drained more than $24 billion of cash in the three years to 2021 due to the pandemic and safety concerns that led to long-term grounding of two of the company’s newest and most important jet models, the 737 MAX and 787 Dreamliner.

That fiasco, which left Boeing behind rival Airbus in global market share, is now in the rearview mirror. In August, Boeing resumed deliveries of the Dreamliner, which had been halted for most of the previous two years by manufacturing errors. United Airlines (UAL) gave Dreamliner confidence in December when it ordered 100 787s with an option to buy 100 more. United also bought 100 737 MAXs, the plane was grounded in 2019 after two crashes caused by a software bug.

Boeing has struggled to meet growing demand for its planes in the face of supply chain problems. Grounded Dreamliners must be recertified before delivery in a process that is more difficult than their initial assembly. Despite these difficulties, Boeing delivered 480 commercial aircraft in 2022, up 41% from the previous year. It delivered 152 commercial aircraft in the fourth quarter, up from 112 in the third quarter.

The company projects free cash flow of $2.5 billion in the fourth quarter and $3 billion to $5 billion in fiscal 2023, on track for a target of $10 billion annually by 2026.

Next week’s earnings report may offer an update on the status of efforts to fix the company’s recently restructured defense business, where overruns on fixed-cost programs led to a $2.8 billion loss in the latest quarter.

The stock has been on a tear lately, soaring 73% since September 30 through Wednesday and hitting an 11-month high this week. Boeing shares have fallen 4% over the past year, compared with a 5% decline in the S&P 500 Industrials sector.

1 Year Total Return for BA and S&P 500 Industrials

Source: TradingView.

Boeing key statistics

Estimate for
4th quarter of fiscal year 2022
4th quarter of fiscal year 2021 4th quarter of fiscal year 2020
Adjusted earnings per share ($) 0.41 -7.69 -15.25
Sales ($B) 20 14.8 15.3
Commercial aircraft delivered 152 99 59

Source: Visible Alpha

A key metric

Commercial aircraft deliveries follow Boeing’s success in meeting product demand in its most important business segment. The company delivered a record 806 planes in 2018, before grounding the 737 MAX.

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