Boeing cash shines while 787’s factory woes weigh on results

By Julie Johnsson / Bloomberg

Boeing burned through just $507 million in cash for the third quarter, far less than the $1.87 billion that Wall Street expected, as it stepped up 737 Max jetliner deliveries and booked a one-time tax benefit.

That was the good news.

The company’s adjusted loss of 60 cents a share and revenue of $15.3 billion billion both missed the average of estimates compiled by Bloomberg.

Weighing on the results: a $185 million accounting charge for the latest delay to the Starliner spacecraft and $183 million in costs from disrupted production of the 787 Dreamliner. The planemaker anticipates spending about $1 billion in total for troubles with the marquee wide-body jet.

And the cash-flow figure was propped up a $1.3 billion tax refund during the quarter, according to an analysis by analyst Nick Cunningham of Agency Partners.

Boeing is working to resolve quality lapses, repair relations with regulators and lighten its debt burden from last year’s travel-market collapse and prolonged grounding of its Max aircraft after two fatal crashes. Restarting Dreamliner deliveries that have been halted for months is key to a financial turnaround. But the planemaker first must address quality defects and win approval from regulators.

“Although this effort lowered revenue in the quarter and drives increased expenses, these actions are essential to bolstering the long-term health of the program and are preparing us for sustained growth and success as market demand returns.” Boeing Chief Executive Officer Dave Calhoun said in a message to employees.

The Dreamliner problems were revealed after a deep dive into production lapses in Boeing’s factories and its supply chain, undertaken in the wake of the Max crashes. Douglas Harned, an analyst at Sanford C. Bernstein, estimated before Boeing’s earnings release that the company has about $9 billion in cash tied up in Dreamliners parked around its factories and in desert storage lots.

Boeing gained 1.5% to $212.98 before the start of regular trading Wednesday in New York. The stock had declined 2% this year this year through Tuesday while the Dow Jones Industrial Average advanced 17%.

The Chicago-based company has lowered 787 output to about two planes a month and won’t return to its previous five-jet pace until it’s cleared to resume deliveries. Boeing said it continues to have “detailed discussions” with the Federal Aviation Administration on what is needed to restart shipments.

Prospects seem better for the Max. Boeing is confident that there’s strong enough demand to hike narrow-body output to 31 jets a month by early next year, although the company only delivered 62 of the planes in the third quarter, well short of Calhoun’s predictions.

Max deliveries would rise if China finally allows commercial flights to resume. Any delays could add to the stockpile of hundreds of the 737 jets stranded at Boeing facilities because of the grounding and the Covid-19 pandemic’s hit to international travel.

Brian West, who stepped in as chief financial officer in August, has been expected to address lingering questions around the 787 as production cuts winnowed profit. The planemaker didn’t deliver any of the advanced wide-body plane in the third quarter and has handed off just 14 this year.

Boeing didn’t record a reach-forward loss for the wide-body jetliner, however, as some analysts had expected. Doing so would have required the company to write down a portion of the $15.1 billion in production costs still on its books after the 787 debuted more than three years behind schedule.