The U.S. plane maker reported wider losses due to problems with its 787 Dreamliner, but also turned cash-flow positive for the first time since 2019
Deliveries of Boeing’s popular 787 Dreamliner slowed to a trickle last year due to a raft of factory defects.
Boeing’s glass still looks half empty, but there are signs of change.
On Wednesday, the plane maker said it lost $4 billion in the fourth quarter—half the size of the hit for the same period of 2020 but much larger than Wall Street analysts were forecasting. Even as Boeing overcame its problems with the 737 MAX, deliveries of the popular 787 Dreamliner slowed to a trickle last year due to a raft of factory defects. This forced the company to record a $3.5 billion charge for compensating customers, plus $285 million in abnormal production costs that are forecast to eventually add up to $2 billion. This is twice what was initially expected.
Yet the company also surprised analysts with a long-awaited milestone: For the first time since 2019, it had positive free cash flow. Boeing’s value in the futures market whipsawed as investors weren’t sure whether to interpret the results as good or bad overall, but they settled clearly on “bad” when the stock market opened.
For valuing aerospace stocks, free cash flow is often preferred to earnings themselves, because calculating the profitability of businesses that depend on hugely costly product launches can be more art than science. In Boeing’s case, extra 787 expenses are having an immediate impact on quarterly earnings, even though the company isn’t spending all the money right away. Cash probably gives a more accurate picture of the underlying business.
Excerpt from WSJ
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