Key insights
- Boeing shares fell significantly after CEO Kelly Ortberg highlighted production constraints on the 737 program and revised cash flow expectations downwards. The CEO indicated that achieving the target production rate of 47 aircraft per month is hindered by wing production. While full-year free cash flow guidance remains $1 billion to $3 billion, exceeding $2 billion is now considered less likely. The company also faces potential risks from defense programs, engine delivery delays for the 787, and ongoing labor negotiations.
Investing.com -- Boeing (NYSE: BA) shares fell 6% Wednesday after President and Chief Executive Officer Kelly Ortberg spoke at the Morgan Stanley Laguna Conference, where he outlined several challenges facing the aerospace manufacturer.
The stock declined as Ortberg revealed production constraints and revised cash flow expectations. The CEO stated that Boeing is not yet stable at its target rate of 47 aircraft per month on the 737 program, with wings production serving as a constraint to ramping up output.
Boeing now sees free cash flow above $2 billion as less likely due to delivery challenges, though the company maintained its full-year guidance of $1 billion to $3 billion in free cash flow.
On the 737 MAX 10, Ortberg said certification is coming "very soon," with all flight testing completed. The MAX 10 represents roughly 30% of Boeing’s 737 backlog.
For the 777X program, Boeing continues testing for certification, with some testing expected to spill into 2027. The company is still planning for 2027 deliveries and is having contract discussions with airlines on built 777X aircraft.
Ortberg also flagged potential risks, including some risk of charges on defense programs and delays in engine deliveries for the 787 program. He noted Boeing is receiving an "increment" of orders from China.
The CEO addressed labor concerns, saying Boeing is working to avoid a work stoppage with the SPEEA union and has contingency plans amid contract negotiations. A strike would shut down the 777X certification program, Ortberg warned.
Boeing expects inventories to align with production at rate 52, with a new line in Everett serving as key to achieving that production rate.