Boeing Unexpectedly Reports Surge In Free Cash Flow Despite Massive Cost Overruns
The sold cash performance overshadowed more bad news from the Arlington-based company’s defense division, which racked up $2.8 billion in losses due to cost overruns on its KC-46 aerial tanker, Air Force One and other military contracts.
Adjusted free cash flow $2.91 billion, estimate $1.02 billion
EPS loss -$6.18 vs. loss/shr 60c y/y; Exp. +0.07
Revenue $15.96 billion, estimate $17.74 billion
Commercial Airplanes revenue $6.26 billion, +40% y/y, estimate $6.95 billion
Defense, Space & Security revenue $5.31 billion, -20% y/y, estimate $6.57 billion
Global Services revenue $4.43 billion, +5% y/y, estimate $4.53 billion
Boeing Capital revenue $52 million, estimate $62.9 million
Operating cash flow $3.19 billion vs. negative $262 million y/y, estimate $1.38 billion
Commercial airplanes oper loss $643 million, -7.2% y/y, estimate loss $195.6 million
Defense, space & security oper loss $2.80 billion vs. profit $436 million y/y, estimate profit $352.7 million
Global services oper earnings $733 million, +14% y/y, estimate $691.2 million
Boeing Capital operating earnings $23 million, estimate $21.9 million
Backlog $381 billion
The uneven results underscored Boeing’s slow progress in overcoming supplier strains and the financial toll from two 737 Max crashes.
As Bloomberg reports, in an early-morning message to employees, CEO Calhoun touted the progress toward Boeing’s goal of achieving positive free cash flow this year and blamed the defense unit’s latest losses on “higher estimated manufacturing and supply-chain costs, as well as technical challenges” on a handful of military programs with fixed-price contracts.
“Turnarounds take time — and we have more work to do — but I am confident in our team and the actions we’re taking for the future,” Calhoun said.
Boeing Unexpectedl y Reports Surge In Free Cash Flow, Despite Massive Cost Overruns
There was both good and bad news in Boeing’s latest Q3 earnings report. First the good news: after man y y ears and man y more quarters of relentless negative cash flow following its countless 737 and Dreamliner fiascoes, Boeing appears to have finall y turned the corner, and in Q3 the compan y reported nearl y $3 billion in FCF, almost 3x more than consensus estimate s. This was onl y the second time Boeing has generated positive cash since Chief Executive Officer Dave Calhoun took the top job in earl y 2020.
The sold cash performance overshadowed more bad news from the Arlington-based compan y ’s defense division, which racked up $2.8 billion in losses due to cost overruns on its KC-46 aerial tanker, Air Force One and other militar y contracts. This resulted
in Boeing reporting a whopping adjusted loss of $6.18 a share in the period, a huge miss to anal y st expectations of slightl y positive earnings, marking the compan y ’s fifth consecutive earnings miss.
Revenue of $16 billion also fell short of the $17.7 billion expected b y Wall Street.
Here is a summar y of the compan y ‘s Q3 results:
Adjusted free cash flow $2.91 billion, estimate $1.02 billion
EPS loss -$6.18 vs. loss/shr 60c y / y ; Exp. +0.07
Revenue $15.96 billion, estimate $17.74 billion
Commercial Airplanes revenue $6.26 billion, +40% y / y , estimate $6.95 billion
Defense, Space & Securit y revenue $5.31 billion, -20% y / y , estimate $6.57 billion
Global Services revenue $4.43 billion, +5% y / y , estimate $4.53 billion
Boeing Capital revenue $52 million, estimate $62.9 million
Operating cash flow $3.19 billion vs. negative $262 million y / y , estimate $1.38 billion
Commercial airplanes oper loss $643 million, -7.2% y / y , estimate loss $195.6 million
Defense, space & securit y oper loss $2.80 billion vs. profit $436 million y / y , estimate profit $352.7 million
Global services oper earnings $733 million, +14% y / y , estimate $691.2 million
Boeing Capital operating earnings $23 million, estimate $21.9 million
Backlog $381 billion
The uneven results underscored Boeing’s slow progress in overcoming supplier strains and the financial toll from two 737 Max crashes. Still, with cash unexpectedl y surging b y rising jet deliveries, stronger receipts and a tax benefit, the compan y sparked investors’ hope that it’s finall y emerging from one of the worst crises in its histor y .After several quarters of relentless declines, Boeing’s quarter-end cash finall y rose, pushing higher b y almost $3 billion from $11.4BN to $14.3BN at Sept 30, while debt was unchanged. The airplan manufacturer said in presentation slides that it has “sufficient liquidit y ” and expects to generate positive FCF for the rest of 2022.
As Bloomberg reports, in an earl y -morning message to emplo y ees, CEO Calhoun touted the progress toward Boeing’s goal of achieving positive free cash flow this y ear and blamed the defense unit’s latest losses on “higher estimate d manufacturing and suppl y -chain costs, as well as technical challenges” on a handful of militar y programs with fixed-price contracts.“Turnarounds take time — and we have more work to do — but I am confident in our team and the actions we’re taking for the future,” Calhoun said.Having mostl y passed the hurricane from the 737-MAX fiasco, Boeing has been hammered with a series of cost overruns : the compan y had alread y recorded $1.5 billion in cost overruns on fixed-price defense contracts during the first half of this y ear as it dealt with shortages of workers with securit y clearance and other supplier stresses. Calhoun declared in April that the compan y would no longer bid near its estimate d costs as it did last decade to secure high-profile contracts, from a militar y trainer to the Air Force One replacements now facing ballooning expenses.Boeing is working to mitigate risks on the programs, Calhoun said. He touted other work underwa y to stabilize Boeing’s factories, like hiring 10,000 emplo y ees, expanding digital tools to track inventor y , creating teams of experts to address industr y wide shortages and ramping up its own parts-fabrication capacit y to help offset supplier shortfalls.After first dumping in kneejerk response to the bad news, then spiking on the good news, BA shares were little changed as of 9:00 a.m. before the start of regular trading. Boeing had declined 27% this y ear through Tuesda y ’s close.
