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The Boeing Company (NYSE: BA ) has been in trouble for some time, fueling speculation that the plane maker has reached an inflection point. After poor passenger traffic and increasing losses reduced the company’s market value, the management made a recovery plan with a forecast that the rebound would start in 2023.
Savings hit losses
The bottom line of the company has been languishing in negative territory for the past few years, with only a few short-lived recoveries. The loss can be attributed mainly to losses related to the grounding of the 737 Max jet in 2019 after hundreds of people died in two separate accidents. The stock selloff that followed the crisis shaved millions of dollars off Boeing’s market cap. Although the stricken model returned to service after the ban was lifted in late 2020, the specter of the crash continues to haunt the company.
Boeing Company Q3 2022 Earnings Call Transcript
While the Chicago-based company’s stock hasn’t seen a historic high, 2022 was a mixed year, marked by some ups and downs. BA shrugged off the mid-year weakness and made solid results in the final months of the year, especially after the third quarter earnings. Correcting the increase in market sentiment, analysts are of the opinion that the company will end fiscal 2022 on a positive note by recording profits in the last three months of the year.
737 MAX Yield
In a trend that will lead to a recovery, there has been an increase in 737 MAX deliveries and orders lately, especially after stable production last year. The company received 561 orders for the 737-family last year. In December alone, 53 737s were delivered even as the jet attracted new customers. Lately, investors have been worried about continued losses in the defense business, production delays, and reduced delivery targets.
Management is looking for a significant improvement in free cash flow this year and next, which will help the company reduce debt that has risen sharply after the grounding of planes and during the pandemic.
From Boeing’s Q3 2022 earnings conference call:
“…The performance of the third quarter gives us a positive attitude in the second half and a full year from 2022. And finally, as we look forward to 2023, operational and financial performance should continue to improve. The acceleration will not be as significant as previously anticipated, and the road to recovery will take longer than expected due to the challenging macro environment. But long term, there is a significant opportunity for our company to return to sustainable growth.
Finance
Since the crisis hit the company in the form of a fatal accident, Boeing has been stuck in defeat. Adding to concerns, it usually reports a bigger-than-expected quarterly loss. In the third quarter, net loss widened to $6.18 per share, even as profits rose 4% to $16 billion. The top line also missed estimates, as it has done in each of the past quarters. Despite the disappointing results, Q3 was important for the company as it generated positive cash flow for the first time since the recovery effort began.
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Meanwhile, market watchers see the company returning to profitability in the fourth quarter when revenue is expected to double to $19.6 billion.. The results are expected to be released on January 25. As it completes its post-COVID aviation recovery, Boeing will have to deal with high inflation and geopolitical issues in the coming months.
Shares traded at $207.5 in the early hours of Wednesday’s session, compared to a 52-week average of $165.62. It has gained about 50% in the last six months.
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