Boeing stock rebounds on first-quarter earnings despite bad headlines
It’s hard to imagine the company enduring worse headlines last quarter. boeing (NYSE:BA), but the embattled aircraft manufacturer released some unexpectedly positive news on Wednesday in the form of a decent earnings report.
You’ve probably seen the headlines. Most notable was the news in January that a door panel on one of the Boeing aircraft was blown off during a flight. Fortunately, no one on board the Alaska Airlines flight was injured.
Boeing is under investigation by federal regulators and has had to testify before Congress about this and other safety issues for quite some time. The company also struggled financially, posting another loss in the first quarter and fiscal 2023.
Last month, Boeing announced that CEO Dave Calhoun would step down at the end of the year, Boeing Commercial Airplanes CEO Stan Deal would resign effective immediately, and Board Chairman Larry Kellner would not run for re-election.
But Boeing shares soared Wednesday after the company reported fiscal first-quarter results and earnings that topped expectations. Shares rose nearly 5% in opening minutes to above $177 and settled back down at about $173 per share in morning trading, still up about 3%.
Boeing’s problem solved
Boeing’s earnings results beat expectations but were still poor. The airplane manufacturer’s revenue fell 8% year-over-year to $16.6 billion and it posted a net loss of $355 million. Additionally, operating cash flow was reported at -$3.4 billion and free cash flow was -$3.9 billion.
These results are largely due to Boeing management’s decision to reduce deliveries to ensure higher safety standards.
“Our first quarter results reflect the immediate actions we took to slow 737 production to improve quality,” Boeing President and CEO Dave Calhoun said in the earnings report. “We will take the time we need to strengthen our quality and safety management systems, and this work will help us build a stronger and more stable future.”
In its commercial aviation business, shipments fell 36% and revenue fell 31%. Boeing recorded 125 net orders during the first quarter, including 85 orders for 737-10 aircraft from American Airlines and 28 orders for 777X aircraft from various customers, including Ethiopian Airlines. In total, Boeing delivered 83 aircraft during the quarter, with its backlog consisting of more than 5,600 aircraft worth $448 billion.
The Defense, Space and Security segment fared better, with revenue up 6% to $7 billion and net income of $151 million, up from a net loss of $212 million a quarter ago. Boeing also won contracts for 17 P-8A Poseidon aircraft for the Royal Canadian Air Force and the German Navy, and a production contract for 17 F/A-18 Super Hornets from the U.S. Navy.
Boeing’s defense, space and security segment has a backlog of $61 billion, with 31% of orders coming from customers outside the United States.
What’s next for Boeing?
It’s been a difficult year for Boeing, to say the least. The company’s shares are down about 32% year to date and about 15% over the past year.
The rise in Boeing stock on Wednesday appears to be linked to steps the company is taking to address safety concerns and a huge backlog of orders. A sizable backlog would bode well for earnings in future quarters.
Boeing is also just one of two major airline manufacturers, so it’s not going anywhere. However, we are entering a transition period not only in terms of new aircraft production but also in terms of leadership.
Today’s good news may give Boeing a temporary boost, but investors should be cautious as there is still a lot of work to be done. It has the potential to be a good value stock, but it may be better to wait for more moves toward profitability.
