What happened
On Wednesday morning, Boeing (BA 0.26%) reported yet another quarter marred by one-time charges and delays on new programs. Investors responded by hitting the "eject" button, sending Boeing shares down as much as 9% in morning trading.
So what
It's been a difficult few years for Boeing, with the company plagued first by 737 MAX design flaws that led to two fatal crashes and an 18-month grounding of the jets, and then by the pandemic, which caused airlines to dramatically scale back their growth plans. Boeing shares have lost more than half their value since the start of 2020, and the company's latest results provide no clear indication that it will be able to quickly regain its footing.
Image source: Boeing.
Boeing posted a first-quarter loss of $2.75 per share on revenue of $14 billion, falling short of analysts' consensus expectations for a $0.12 per share loss on revenue of $15.83 billion. The quarter included more than $200 million in one-time charges related to lost business due to sanctions on Russia and more than $1 billion in charges due to delays in its T-7A Air Force trainer plane and the new Air Force One.
The real area of concern for investors, though, was the commercial side of the business, which has long fueled Boeing's growth, but which now continues to sputter. The aerospace giant delivered 18 more planes in Q1 than it did in the prior-year period, and said 737 MAX production and deliveries continue to increase. But the MAX production rate is well below what the company envisioned prior to the pandemic.
Boeing also confirmed reports that it will not begin making the first deliveries of the new version of its 777 widebody aircraft until 2025, nearly five years later than the company's original target. These delays are in part because Boeing is facing heightened regulatory scrutiny following the issues uncovered during investigations into what went wrong with the 737 MAX.
Now what
The good news is that, despite burning through $3.2 billion in cash in the first quarter, Boeing continues to expect free cash flow to turn positive this year. The company's debt ballooned during the pandemic, and it desperately needs cash flowing in from plane sales to bolster its balance sheet. Management remains optimistic about long-term demand for travel and new airplanes, forecasting that global passenger traffic will return to 2019 levels by 2024.
Commercial aviation remains a massive growth opportunity thanks to the rise of the global middle class, and Boeing is in an enviable position to take advantage of that growth as half of what is essentially a passenger jet duopoly with Airbus (EADSY 1.13%). But over the past five years, it has also demonstrated a troublesome pattern of program setbacks and stumbles, and these continue to pressure the stock.
The worst is likely behind Boeing, but its recovery will be slow and uneven. Investors should be in no rush to jump in and buy on this dip.
