Boeing surprised investors with a steep fourth quarter loss Wednesday, as rising costs weighed against recovering jet deliveries. BA stock recovered early losses to close higher.
The Boeing earnings report arrived amid positive sentiment, following the Jan. 10 announcement of a sharp jump in aircraft orders and deliveries for 2022. And on Jan. 13, the bestselling Boeing 737 Max returned to the skies in China for the first time since 2019, following two fatal crashes.
Production costs and other issues were key to the results, as the aircraft maker works to restore operational and financial strength following a number of issues, led by the two-year grounding of its 737 Max jetliners. At an investor event in November 2022, Boeing guided higher deliveries of its 737 Max jet in 2023. In December 2022, the Dow Jones defense and aerospace giant reported the "largest Dreamliner order in Boeing history."
Commercial aviation continues to recover after the pandemic hit to travel, the U.S. carriers say.
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Boeing Earnings
Estimates: Analysts polled by FactSet expect Boeing earnings to rebound to 30 cents per share. That compares to a net loss of $7.69 per share a year ago due to hefty charges on its troubled 787 Dreamliner program. It would also mark the first quarterly earnings gain after five straight quarters of losses.
Q4 revenue is seen rebounding 36% to $20.182 billion. Commercial sales are seen vaulting 95.6%, growing for a third straight quarter. Defense sales are seen rising 7.6%, returning to growth after five down quarters.
Wall Street predicts free cash flow (FCF) of $3.103 billion, up from both the prior third quarter and a year ago. Boeing has started to generate cash again after significant cash burn over the past three years.
Results: Boeing reported a core loss per share of $1.75. Revenue jumped 35% to $19.98 billion. The commercial airplanes unit reported a negative operating margin of 6.8%, reflecting "abnormal costs and period expenses, including research and development."
In the defense, space and security unit the operating margin recovered to 1.8%, but still "reflects the continued operational impact of labor instability and supply chain disruption," the company said.
In terms of aircraft deliveries, China's refusal to take new 737 MAX jets, parts shortages and problems converting planes in storage left single aisle deliveries in 2022 well short of the target set last January, according to The Wall Street Journal. "The 69 planes handed over in December are viewed by analysts as a high point that will be tough to match soon."
Outlook: Analysts lowered projections for Boeing earnings to $3.26 per share in 2023, down from $3.66. Net loss for 2022 came in at $11.06 per share, vs. an estimated net loss of $7.99. They lowered free cash flow guidance to between $3 billion and $5 billion, vs. earlier estimates for $5.684 billion.
Boeing Stock
Shares of Boeing fell more than than 3% in early trade on Wednesday. The stock recovered to close up 0.3% at 212.68, after a quick test of short-term support. BA stock is extended from a November 2022 breakout past 173.95 after a strong rally off late September lows. The MarketSmith charts shows no new buy point for now.
The relative strength line for BA stock has risen to a new high. A Relative Strength Rating of 95, out of a best-possible 99, means that Boeing stock has outperformed 95% of all stocks in IBD's database over the past year.
Boeing Production, Deliveries Jump
In 2022, Boeing stabilized 737 production and resumed 787 deliveries, the company announced Jan. 10.
Boeing delivered 480 airplanes and won 774 net new orders, up from 340 deliveries and 479 net new orders the prior year.
However, Airbus delivered 661 jets and won 820 net orders in 2022. Boeing lagged its European rival for the fourth straight year.
As the airline recovery expands, Boeing on Jan. 10 reported strong demand for its top-selling 737 Max narrow-body jet. Demand is also robust for another top seller, the 787 Dreamliner widebody jet used in long-haul travel, the company said.
Both jets have been dogged by troubles. The bestselling Boeing 737 Max was grounded around the world following two fatal crashes in 2018 and 2019. And a shortage of jet engines weighed on Boeing 737 Max deliveries in 2022.
Deliveries of the 787 Dreamliner jet resumed in August 2022, after a long pause due to a series of manufacturing defects.
Those challenges hit Boeing earnings and stock. But BA stock has rallied sharply from late October 2022 lows after management in November affirmed rising jet deliveries.
In early December, Boeing announced a record 787 Dreamliner order from United Airlines, which also will buy many 737 Max jets.
In January, Boeing jet-engine supplier General Electric, as well as Delta Air Lines and American Airlines, all signaled robust demand for commercial air travel. Air travel continues to recovers from a hit during the coronavirus pandemic.
When Boeing reports earnings Jan. 24, investors will watch for any falloff in demand and the state of supply chains, amid a weakening macro and growing recession fears.
Over the past year through Jan. 17, Boeing stock fell 6.2% vs. a 14.3% tumble for the S&P 500 index. Boeing stock has rallied 75.4% from its Sept. 30 low, also far outperforming the index over this period.
