Last week, Boeing (BA -1.58%) reported that revenue returned to growth in Q3 and that the company had generated $2.9 billion of free cash flow in the period. These achievements marked important milestones in the aerospace giant's lengthy turnaround effort.

Nevertheless, Boeing's debt load remained unchanged at $57.2 billion during the third quarter: up from $11.9 billion just four years ago. With the global economy weakening, supply chains in tatters, and previous mistakes still costing Boeing billions of dollars, the company's weak balance sheet makes Boeing stock look extremely unattractive.

BA Financial Debt (Quarterly) Chart

Boeing Debt (Quarterly), data by YCharts.

No signs of stability

In some respects, Boeing made progress on its turnaround last quarter. Most notably, it resumed deliveries of the 787 Dreamliner in August after a long halt caused by quality control issues. Boeing delivered nine 787s during the quarter. That contributed to the company's return to revenue growth and positive free cash flow. (A $1.5 billion tax refund also helped.)

However, Boeing continues to struggle across many facets of its business. For example, its defense unit recorded a $2.8 billion operating loss last quarter, due to a slew of charges related to various fixed-price military and space projects. That caused the company to report a shocking core loss of $6.18 per share for Q3.

Additionally, management warned that supply chain issues will continue to weigh heavily on commercial jet output over the next year. Geopolitical tensions between the U.S. and China have nearly closed off the massive Chinese market for Boeing. Lastly, the smallest and largest models of Boeing's troubled 737 MAX program are unlikely to meet a Dec. 31 deadline to be certified as currently designed. Boeing may succeed in lobbying Congress to extend the deadline, but otherwise, it will likely be forced to cancel both the 737-7 and 737-10.

In short, a combination of self-inflicted wounds, bad luck, and macroeconomic headwinds will partially offset the benefit of clearing out excess 737 MAX and 787 inventory in 2023 and 2024. That will keep free cash flow well below historical levels.

Debt reduction will take a long time

Boeing's subpar outlook makes its weak balance sheet particularly unfortunate. Boeing had a $250 million debt maturity in recent days and has another $9.5 billion maturing in 2023 and the first quarter of 2024.

While Boeing should continue to generate cash over the next year and a half, free cash flow probably won't fully cover these upcoming maturities due to the company's slow recovery. That would force Boeing to tap into its $14.3 billion of cash and investments to pay down debt.

Even after making these scheduled debt repayments, Boeing will still have over $47 billion of debt. The company will likely have to devote all of its free cash flow to debt reduction until at least 2026 to fix its balance sheet. As a result, Boeing shareholders shouldn't expect the company to resume dividend payments or buy back stock in a meaningful way anytime soon.

Too much risk relative to upside

By the time Boeing gets its debt back to a manageable level, the company will need to begin its transition away from its most important product -- the 737 MAX -- to a next-generation narrow-body jet. Boeing has no choice but to develop an all-new narrow-body given the 737 MAX's technical limitations relative to the competing Airbus A320neo family.

But doing so could be extremely costly. Initially, Boeing will need to ramp up R&D spending to design a brand-new jet family. It will then need to spend money to build a production system while offering bigger discounts on the outgoing 737 MAX to sell its remaining delivery slots. And once the new plane is ready, it could take years to bring production costs down to make the program profitable.

A rendering of a Boeing 737 MAX 9 flying over clouds.

Image source: Boeing.

Boeing hopes to use cutting-edge design and production processes to dramatically reduce the cost of transitioning to next-generation jets. If it's successful, Boeing stock could eventually pay off for shareholders who are willing to hold the stock for more than a decade.

However, there's no guarantee that this ambitious plan will work -- particularly in light of Boeing's frequent miscues in recent years. With $57 billion of debt and numerous external headwinds to manage, anything short of perfection could lead to continued underperformance for Boeing stock.