Boeing's losses narrow, but its airplane business keeps getting weaker

By Tomi Kilgore and Claudia Assis

The commercial-airplane business has weakened to the point that it is now Boeing's smallest business segment

Boeing Co. reported a narrower-than-expected first-quarter loss and revenue that beat forecasts Wednesday, as strength in the defense business offset continued sharp weakness in commercial airplanes.

The commercial-airplane business has weakened to the point that it is now Boeing's smallest business segment, behind both the defense, space and security business and the global services business for the first time since the first quarter of 2022.

"We are absolutely committed to doing everything that we can to make certain our regulators, our customers, and most importantly, our employees and the public are 100% confident in Boeing," outgoing Chief Executive Dave Calhoun said in a post-results call with analysts.

Boeing's stock (BA) rallied 3.3% after earnings, but turned lower later in the morning, falling 1.2% just past noon. On Tuesday, it closed just 0.8% above the 17-month closing low of $167.82 on April 15.

The company's net losses narrowed to $343 million, or 56 cents a share, from $414 million, or 69 cents a share, in the same period a year ago.

Excluding nonrecurring items, such as pension-cost adjustments, core per-share losses of $1.13 beat the FactSet loss consensus of $1.63.

Revenue fell 7.5% to $16.57 billion, but was above the FactSet consensus of $16.24 billion.

Revenue from commercial airplanes - which has been hampered by aircraft groundings amid safety concerns - sank 30.6% to $4.65 billion, well below the FactSet consensus of $5.79 billion.

Deliveries dropped 36.2% to 83 planes, as 737 deliveries tanked 40.7%, to 67 from 113, while 767 deliveries inched up to 3 from 1 and 787 deliveries rose to 13 from 11.

"During the quarter, the 737 program slowed production below 38 per month to incorporate improvements to its quality management system and reduce traveled work within its factory and supply chain," the company said. "In addition, Commercial Airplanes is implementing a comprehensive action plan to address feedback from the FAA audit of 737 production."

Read: FAA reportedly investigating whistleblower claims alleging flaws in Boeing's 787 Dreamliner.

Among Boeing's other business segments, defense, space and security revenue grew 6.3% to $6.95 billion amid higher volume, to top the FactSet consensus of $6.35 billion.

And global-services revenue increased 6.9% to $5.05 billion, reflecting higher commercial volume, to exceed expectations of $4.96 billion.

Free cash flow was negative $3.9 billion, compared with negative $786 million last year, due to lower deliveries and unfavorable timing of receipts and expenses. But that beat the FactSet consensus of negative $4.49 billion.

Cash and investments in marketable securities dropped to $7.5 billion at quarter end from $16 billion at the start of the quarter, reflecting debt repayment and free cash flow.

At the call, Calhoun spoke briefly about the company's CEO succession plan.

Calhoun has said he'll step down by the end of the year, with Chief Operating Officer Stephanie Pope widely viewed as the top internal candidate. Pope was recently made head of Boeing's commercial-plane division.

Boeing's board members "know I have an internal candidate that I think the world of," Calhoun said. "They will balance sort of their perspectives and get to the right conclusion with my full support."

One thing is certain, he said: "I do not expect that to happen in the next month or two, so let's all be clear about that."

The right candidate needs to be prepared "to make smart long-term decisions and get the development programs right," Calhoun said.

BofA Securities analyst Ronald Epstein said in a note after the results that the question of who will be Boeing's next CEO is "key," alongside questions about the company's turnaround timing.

Boeing will likely be able to "continue to benefit from the robust global air travel demand environment and, in the long run, benefit from improved quality assurance," Epstein said.

In the short- to medium-term, however, "there are risks due to disruptions related to management changes, multiple government investigations and the potential acquisition" of supplier Spirit AeroSystems Holdings Inc. (SPR), he said.

Boeing's stock has tumbled 36% year to date through Tuesday, while the Dow Jones Industrial Average has gained around 2%. Boeing is a Dow component.

-Tomi Kilgore -Claudia Assis

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04-24-24 1205ET

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