London: Boeing Co.’s cash surged last quarter as it restarted 787 Dreamliner deliveries after a lengthy halt, dulling some of the pain after the aviation titan’s earnings missed Wall Street’s estimates for a fifth consecutive quarter.
The planemaker reported $2.9 billion of free cash flow for the third quarter, outpacing the $1.02 billion average of estimates compiled by Bloomberg. It’s only the second time Boeing has generated positive cash since CEO Dave Calhoun took the top job in early 2020. And it gave investors a glimpse of the bounty that awaits as the manufacturer clears hundreds of undelivered aircraft from its storage lots.
The performance accompanied more bad news from the Arlington, Virginia-based company’s defense division, which racked up $2.8 billion in losses due to cost overruns on its KC-46 aerial tanker, Air Force One and other military contracts.
Boeing’s adjusted loss was $6.18 a share in the period, the company said Wednesday in a statement, while analysts had expected slightly positive earnings. Revenue of $16 billion also fell short of the $17.7 billion expected by Wall Street.
The uneven results underscore Boeing’s slow progress in overcoming supplier strains and the financial toll from two 737 Max crashes. While cash reflected rising jet deliveries, it also was boosted by a tax refund, around $1 billion of cash advances and lower compensation payments to 737 Max customers, Vertical Research Partners analyst Robert Stallard said.
“If this quarter teaches us anything, it is that investors should not fall into the trap of just seeing Boeing as an ‘aerospace’ company,” Stallard said in a note to customers. “There is clearly a ton of risk in the Defense division as well, which has probably been widely underestimated.”
The shares swung between gains and losses early Wednesday, rising 0.9 per cent at 9:49 a.m. in New York. Boeing had declined 27 per cent this year through Tuesday’s close.
In an early-morning message to employees, Calhoun touted the progress toward Boeing’s goal of achieving positive free cash flow this year and blamed the defense unit’s latest losses on “higher estimated manufacturing and supply-chain costs, as well as technical challenges” on a handful of military programs with fixed-price contracts.
“Turnarounds take time - and we have more work to do - but I am confident in our team and the actions we’re taking for the future,” Calhoun said.
Boeing had already recorded $1.5 billion in cost overruns on fixed-price defense contracts during the first half of this year as it dealt with shortages of workers with security clearance and other supplier stresses.
Calhoun declared in April that the company would no longer bid near its estimated costs as it did last decade to secure high-profile contracts, from a military trainer to the Air Force One replacements now facing ballooning expenses. And he reiterated Wednesday that the company erred in agreeing to the aggressive terms sought by former US President Donald Trump on Air Force One, a two-jet program packed with new technology.
“It turns out the critics were right,” Calhoun said of Boeing’s former strategy of undercutting competitors on defense deals, speaking in an interview on CNBC.
The planemaker is working to mitigate risks on the programs, Calhoun said in his employee note. He touted other work underway to stabilize Boeing’s factories, like hiring 10,000 employees, expanding digital tools to track inventory, creating teams of experts to address industrywide shortages and ramping up its own parts-fabrication capacity to help offset supplier shortfalls.
Boeing’s cash and marketable securities rebounded to $14.3 billion from $11.4 billion in the second quarter, and the manufacturer said in presentation slides that it has “sufficient liquidity.” That’s a crucial cushion for a company with a $55.7 billion debt load.