Boeing Crashes and Burns. Big Surprise.

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By now you've heard the news: Boeing (NYSE: BA) reported third-quarter earnings yesterday, and "all systems" are far from "go."

Sales came in light at $16.7 billion, or about 3% below expectations. Profits ... well, no one expected there would be any. Still, Boeing's larger-than-expected $2.23-per-share loss came as a disappointment. And yet, it wasn't all bad news.

Thunderclouds with a trim of silver
For one thing, Boeing confirmed its 787 Dreamliner will fly by year's end. With just two months remaining in 2009, management's visibility on this should be pretty good; I'd be surprised if Boeing misses this latest self-imposed deadline.

As for management's promise to begin deliveries by Q4 2010 -- a promise nearly drowned out by the sound of toes tapping at Delta (NYSE: DAL), Continental (NYSE: CAL), and AMR (NYSE: AMR) -- I see more risk of that one getting pushed back. Boeing has demonstrated over the past several years that the more time that lies between promise and delivery, the more time there is for something to go wrong. Burned several times already, aerospace analysts like Broadpoint.Amtech are already voicing skepticism about the 2010 delivery date. (Which, if correct, would be bad news for suppliers like Honeywell (NYSE: HON), Spirit AeroSystems (NYSE: SPR), and United Technologies (NYSE: UTX).)

But let's not accentuate the negative today. Boeing gives us plenty of opportunity to lay blame; in contrast, Wednesday's report provided a rare bit of good news.

The cash is back
While the mainstream media spent most of yesterday lamenting the non-cash costs of gaffes in the 787 and 747-8 programs, the real news is that Boeing's cash flow returned in Q3. Reversing last year's Q3 cash-burn, Boeing generated nearly $1 billion in free cash flow last quarter.

Hallelujah! So is it safe to board?
Not necessarily. With $2.4 billion in operating cash flow, and capital expenditures (capex) tracking at $1 billion, Boeing has generated free cash flow of $1.4 billion so far this year -- most of that in Q3. But the tide hasn't turned entirely. Management projects operating cash flow of "greater than $2.5 billion" for the full fiscal year, just $100 million above the total through last quarter. While the degree to which operating cash flow exceeds that target is unknown, management also expects about $300 million in capex next quarter. Meaning Boeing should return to its cash-burning ways.

Based on that Q4 projection, personally, I'd hold off on buying into Boeing's turnaround story just yet. With Wall Street projecting just 7% long-term growth at Boeing, I don't think even $1.2 billion in free cash flow justifies Boeing's current $36 billion market cap.

On the other hand, if 787 deliveries do begin in 2010, cash production could surge. Management promises us an update on fiscal 2010 projections in this year's Q4 report. I'd suggest waiting to see what Boeing expects its cash to look like, before investing any of your own.

Is now the time to take a gamble and buy Boeing? On Fool.com, we report, but at Motley Fool CAPS you decide. Click on over and tell us what you think.