Boeing Q4 unexpectedly failed to turn losses into profits, annual free cash flow turned positive
According to Wall Street, financial reports show that aerospace giant Boeing is still hit by high costs, and labor shortages and tight supply chains are still challenges, but it keeps its annual financial guidance for this year and plans to significantly increase aircraft production.
Before the U.S. stock market on Wednesday, January 25th, Eastern Time, Boeing announced that it failed to turn losses into profits as expected by the market in the fourth quarter of 2022, and its revenue was slightly lower than expected:
- Adjusted earnings per share (EPS) on a non-GAAP basis for the fourth quarter was -$1.75, or a loss of $1.75 per share, while analysts compiled by Bloomberg expected a profit of $0.26 and a loss of $7.69 in the same period last year; GAAP caliber for the quarter The next EPS was a loss of US$1.06, compared with a loss of US$7.02 in the same period last year.
- Operating income in the fourth quarter was US$19.98 billion, a year-on-year increase of 35%, and analysts expected US$20.01 billion.
In terms of business, the operating income of most of Boeing's main businesses is higher than market expectations, but the profit or loss performance of all businesses is worse than expected: Customized Twin B light,runway middleline light,Inset TLOF manufacturers,China LED frangible flange
frangible flange suppliers.
- The revenue of commercial aircraft was US$9.22 billion, a year-on-year increase of 94%. Analysts expected a loss of US$9.1 billion. The operating loss of this business was US$626 million, a year-on-year decrease of 86%. Analysts expected a loss of US$177.3 million;
- Defense, aviation and security business revenue was US$6.18 billion, a year-on-year increase of 5.4%, analysts expected US$6.27 billion, the business’s operating profit for the quarter was US$112 million, and analysts expected a profit of US$307.1 million;
- Global service revenue was US$4.57 billion, a year-on-year increase of 6%, analysts expected US$4.54 billion, operating profit for the quarter was US$634 million, and analysts expected a profit of US$717.3 million.
In addition, Boeing Capital, a subsidiary of Boeing that provides financial solutions for customers purchasing commercial aircraft, had revenue of US$49 million in the fourth quarter, a year-on-year decrease of 22%, far below analysts' expectations of US$66.9 billion. The company's operating profit for the quarter was US$15 million. , analysts expected a profit of $31.7 million.
After the announcement of the financial report, Boeing fell nearly 3% at the opening of the market on Wednesday. When it refreshed its daily low in early trading, the intraday decline was nearly 4.2%.
For the first time since 2018, the annual free cash flow has turned positive, reaffirming that the cash flow guidance remains unchanged
The biggest highlight of Boeing's financial report this time is that thanks to the large number of aircraft shipments at the end of the year, from the perspective of cash flow in the fourth quarter, Boeing's operations have improved:
The operating cash flow in the fourth quarter was US$3.46 billion, compared with US$716 million in the same period last year, analysts expected US$3.32 billion, and the annual operating cash flow was US$3.5 billion.
The adjusted free cash flow in the fourth quarter was 3.13 billion US dollars, analysts expected 2.89 billion US dollars, and the full-year free cash flow was 2.3 billion US dollars, which was the first time since 2018 that the cash flow turned positive.
As of the end of 2022, Boeing's backlog is worth $404 billion, totaling more than 4,500 commercial aircraft.
In terms of guidance, Boeing reiterated its performance guidance for 2023 released in November 2022. It expects annual operating cash flow of US$4.5 billion to US$6.5 billion and free cash flow of US$3 billion to US$5 billion. Boeing's goal in November was to achieve annual free cash flow of $10 billion by 2025 to 2026.
Boeing CEO Dave Calhoun said in a memo to employees that although the company has made meaningful progress, challenges remain, and we still have more work to do in order to promote the company's operations and stability within the supply chain. In 2023, the company expects to steadily increase productivity, further improve performance, make progress in development programs, and deliver on shipment commitments.
Calhoun expects operating margins to be "elastic" in 2023, reflecting the cost of preparing to deliver a few hundred jets in stock. He also said demand across the firm's portfolio was strong.
Boeing plans to increase 737 production rate by 61% from 2025 to 2026, and double the 787 production rate from the end of 2023
Shortages of key components such as engines and too few trained production line workers have plagued Boeing. Analyst George Ferguson also mentioned that increasing deliveries can boost Boeing's cash flow, but aircraft destocking and maintenance to meet the latest airworthiness standards will increase Boeing's expenses. Along the way, and before getting cash, Boeing will have to pay. He estimated that Boeing had 229 undelivered Max planes in its inventory as of December.
According to the commentary, airlines are getting rid of the trough hit by the new crown epidemic. Airbus’s SE models before 2029 are basically sold out. Boeing 737 Max has the opportunity to make progress in the competition with Airbus’s SE models. But because of a shortage of engines, especially those for the 737 Max, and supply issues such as computer chips, Boeing factories have been slow to start.
The media pointed out that the production rate of Boeing 737 Max model is lower than the level originally expected by Boeing executives, and the delivery level of single aircraft and wide-body 787 Dreamliners is also behind analysts' expectations.
While reporting earnings, Boeing said it was starting to accelerate deliveries of the jets and reduce its inventory of the Max, 787 Dreamliners and 777X models, which already have hundreds of them and are still growing. Production rates for the 737 program have held steady at 31 per month, and 787 production rates remain low.
Boeing plans to increase the production rate of 787 to 5 per month by the end of 2023; from 2025 to 2026, Boeing will increase the production rate of 737 to 50 per month, which is equivalent to an increase of more than 61% compared with the current level of 31. Increase 787 production rate to 10 per month, doubling from late 2023.