Boeing (BA) gave the outlook for free cash well above Wall Street estimates during its Investor Day on Wednesday on expectations of increased jet deliveries. BA shares jumped back to a key level. Boeing’s main suppliers also increased.
In 2022, Boeing expects to generate between $1.5 billion and $2 billion in free cash flow (FCF), management told investors on Wednesday. Wall Street expected FCF of $670.3 million for the full year. He expects $3-5 billion in FCF in 2023 as 737 and 787 deliveries ramp up. By 2025-2026, Boeing forecasts $10 billion in FCF and $100 billion in revenue.
Boeing’s FCF peaked at $13.6 billion in 2018, followed by three years of cash burn, according to FactSet.
Aviation and defense giant Dow Jones said on Wednesday it expects to deliver about 375 of its best-selling 737 jets in 2022, rising to 400-450 next year. By 2025-2026, Boeing expects around 800 commercial deliveries, including the 737 and 787 Dreamliner. Year-to-date, Boeing has delivered 277 units of the 737 jet and 9 units of the 787, the company said earlier in October.
Boeing’s best-selling 737 Max returned to service in December 2020 after two fatal flights resulted in groundings around the world. Deliveries of the 787 resumed last quarter after manufacturing issues. Aircraft manufacturers receive the bulk of payments from airlines and other customers after the jets are delivered.
Earlier, on Oct. 26, aviation and defense giant Dow Jones simply said it continues to expect a return to positive free cash flow this year as customers like Alaska Air Group (ALK) commands over 737 jets. Management uses free cash flow as a measure to assess business performance and overall liquidity.
On Oct. 26, Boeing also posted a surprise third-quarter loss, as challenges in its defense segment offset gains in commercial aviation.
For the full year, Wall Street analysts now expect a net loss of $6.39 per share. They expect Boeing’s annual profits to return in 2023, after four years of losses.
Ahead of the event, many investors were hoping for details on production and delivery targets for the best-selling 737 Max jet, which drives Boeing’s earnings and free cash flow, as well as its bigger brother 787.
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Boeing shares jumped 5.8% to 151.60 amid a broad stock market decline today, resuming the rolling 50-day line. BA stock reversed lower on Oct. 26, plunging nearly 9% on the big miss in third-quarter earnings. Boeing stock has now returned to the highs of October 26. Major Suppliers to Boeing General Electric (GE) and Spirit AeroSystems (SPR) rose 0.5% and 1.2%, respectively, on Wednesday. Rival aircraft manufacturer Airbus (EADSY) fell 0.7%.
Spirit AeroSystems provides airframes for the 737 Max. A GE joint venture provides engines for the jet.
BA stock has a minimum base with a buy point of 173.95.
Boeing has suffered from the collapse of commercial and business air travel during the pandemic. He also had to deal with several setbacks in key defense programs.
The company is working on a turnaround as recession fears grow and supply disruptions persist.
“While many investors are focused on what Boeing’s guide will be, we are looking for a lot more,” BofA Global Research analyst Ronald Epstein wrote in a note to clients Tuesday ahead of the event.
The analyst added: “If we are to see anything close to BA’s peak valuation again, significant change needs to take hold across the business. We are looking at how BA is looking for a culture change while balancing investments, supply issues, inflation, balance sheet deleveraging.” Epstein maintained a neutral rating on Boeing shares with a price target of $165.
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