When Boeing (BA -0.94%) reported its big earnings miss last month, you probably would have expected the stock to sell off. After reporting losses in nine of the 11 quarters since the start of the pandemic, analysts had hoped that the aerospace giant was finally starting to find its footing again, and would report a profit for its fiscal Q4 2022.
It didn't.
Instead of earning $0.26 (as analysts expected), Boeing reported a massive $1.75-per-share loss. While it's true that Boeing stock is down modestly in the two weeks since results came out -- about 0.3% off its pre-earnings price -- Boeing neatly sidestepped the expected post-miss sell-off.
So why is that?
Boeing by the numbers
To find out, let's review a few facts and figures.
2022 was kind of a transition year for Boeing. Revenue growth was a modest 7% year over year ($66.6 billion in full-year revenues), but both operating profit margins (-5.3%) and losses ($8.30 per share) came in worse than in 2021.
The good news is that as the year wore on, Boeing's numbers seem to have improved -- and rather dramatically. Although earnings as calculated according to generally accepted accounting principles (GAAP) showed a loss for Q4, that loss wasn't nearly as bad as what Boeing experienced in Q4 2021. Operating margins improved to just -1.8%, and the company's per-share losses slowed to only $1.06 per share. At the same time, Boeing's revenues really took off in Q4, rising 35% year over year.
Arguably best of all, Boeing generated positive free cash flow of $3.1 billion in Q4, offsetting all the year's earlier cash burn and leaving the company with $2.3 billion in positive cash profits for the year.
Focus on the cash
Why is this important to Boeing? Simply put, cash is a very useful thing to have around.
With Boeing generating a positive flow of cash into its coffers once more, the company will no longer need to take out new debt to fund its operations. To the contrary, the more cash Boeing generates, the more progress is can make paying down the tens of billions of dollars' worth of debt it took on to get it through the pandemic. (Boeing's long-term debt load, by the way, stands at $50.5 billion today, versus just $18.2 billion in 2019, before COVID-19 disrupted the air travel industry.)
In turn, by lowering its debt load, Boeing will lighten its obligation to pay interest on its debt -- a necessity given how high and how fast interest rates have been rising. Last year, for example, Boeing spent $2.5 billion servicing its debt load -- three and a half times what it spent in 2019.
Boeing's already done a good job cutting costs, with selling, general, and administrative expenses down 11% from pre-pandemic levels. It announced even more cuts just earlier this week, eliminating 2,000 white-collar jobs through layoffs, attrition, and outsourcing. The more debt Boeing can pay off with free cash flow, the faster the company can return to earning GAAP profits again.
The future for Boeing
How soon can investors expect this to happen?
According to analysts polled by S&P Global Market Intelligence, Boeing is actually on course to earn its first post-pandemic profit this very year -- $2.22 per share -- even as it roughly doubles free cash flow to $4.3 billion. As cash continues to accumulate, debt dwindles, sales accelerate, and profits come with them, Wall Street sees this figure more than tripling to $7.88 per share as soon as next year (valuing Boeing at a not cheap, but not dramatically expensive, 26.8 times forward earnings).
Looking even farther out, Wall Street sees profits more than doubling again by 2027 -- $16.50 per share.
And as Boeing continues improving its earnings, there's one more thing that investors can hope might happen: For the first time since 2020, Boeing could conceivably reinstate its dividend, which prior to the pandemic had grown to more than $8 a share. At today's share price, that would equate to a dividend yield of nearly 4%.
The future for dividend investors
Admittedly, any reinstatement of Boeing's dividend program could be a long time coming. Crunching the numbers last year, my Foolish colleague Adam Levine-Weinberg argued that investors probably shouldn't count on receiving any dividend checks from Boeing before 2026 at the earliest. That makes sense, though, if Boeing takes the prudent course and focuses first on fixing its debt problem before considering a return to paying dividends.
The longer Boeing keeps making the right moves, improving its cash production and paying down its debt, the brighter the prospects for Boeing becoming a powerful dividend stock once again.
