Release Date: January 28, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Boeing Co (BA, Financial) has made significant progress in stabilizing its production system, particularly for the 737 MAX, with plans to increase production rates beyond 38 per month.
- The company has successfully shored up its balance sheet, maintaining an investment-grade credit rating and demonstrating market confidence through a strong demand for its offerings.
- Boeing Co (BA) is actively managing its development programs, working closely with customers like the US Air Force to improve program performance and outcomes.
- The company is making strides in cultural change, focusing on leadership engagement and accountability, which is fostering a positive work environment.
- Boeing Global Services (BGS) delivered record operating margins, with strong performance in both commercial and government sectors, contributing to the company's overall financial health.
Negative Points
- Boeing Co (BA) reported a 31% decline in revenue for the quarter, primarily due to lower commercial deliveries associated with the IAM work stoppage.
- The company faced a core loss per share of $5.90, reflecting impacts from the IAM work stoppage, defense program charges, and workforce reduction costs.
- Free cash flow was a negative $4.1 billion, impacted by lower commercial deliveries and unfavorable working capital timing.
- Boeing Defense and Space (BDS) recorded a $1.7 billion pre-tax charge due to cost pressures on fixed-price development programs, impacting overall financial performance.
- The company continues to face challenges with supply chain constraints, particularly in the 787 program, affecting production and delivery timelines.
Q & A Highlights
Q: Kelly, how do you view the restart on the 737 MAX production, and what are the key performance indicators (KPIs) agreed with the FAA for increasing production rates?
A: Kelly Ortberg, President and CEO, explained that the production restart on the 737 MAX has been stable, with significant inventory and no current supply chain constraints. The KPIs agreed with the FAA include notice of escape hours, part shortages, employee proficiency, rework by line, traveled work at rollout, and ticketing performance. These KPIs are trending positively, and stability at 38 per month must be demonstrated before requesting a rate increase.
Q: Brian, can you provide insights into the free cash flow dynamics for 2025, considering factors like working capital headwinds and 777X spending?
A: Brian West, CFO, stated that 2025 free cash flow will be consistent with previous guidance, with adjustments for increased CapEx and BDS charges. The first half of the year will be negative, but the second half is expected to be positive, driven by higher deliveries and favorable receipt timing. The company aims for positive momentum exiting 2025, setting up for 2026.
Q: Kelly, how are you managing the fixed-price development programs within Boeing Defense and Space (BDS), and what changes are being implemented?
A: Kelly Ortberg mentioned that active management with customers, particularly the US Air Force, is underway to derisk programs like the T-7A. Memorandums of Agreement (MOAs) are being converted to contract changes to improve outcomes. The focus is on stabilizing estimates to complete and managing risks proactively.
Q: Kelly, could you discuss Boeing's portfolio strategy and any potential divestitures?
A: Kelly Ortberg indicated that Boeing has completed a detailed portfolio review, identifying areas that are not core to the business. While there won't be a major restructuring, some streamlining and potential divestitures may occur. The focus is on pruning the portfolio rather than significant cuts.
Q: Myles Walton asked about supply chain constraints for the 787 and the integration with Spirit.
A: Kelly Ortberg responded that Spirit's fuselage production is not a constraint for reaching 38 per month on the 737. For the 787, challenges remain with seat certifications and heat exchangers, but improvements are underway. The integration with Spirit is progressing well, with a focus on maintaining supply chain stability.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
