Updated Version 7 - Boeing shares fall due to lower-than-expected 737 production and weak free cash flow outlook

Additional free cash flow details included in paragraph 2 and paragraphs 6-7; Information on 737 model yields added in paragraphs 14-15; Details on 767, 777F, and 777-9 model yields included in paragraphs 18-20

Dan Catchpole/Shivansh Tiwary

Reuters, Seattle, October 27 - Boeing BA.N CEO Kelly Ortberg said on Tuesday that the company will not achieve its 737 production or jet delivery targets this year, setting back its recovery process and causing its share price to plummet by nearly 10%, the biggest one-day drop in more than 18 months.

The company also said it expects free cash-flow growth to lag analyst estimates, with the $10 billion target now set for 2029, a year later than general investor expectations (according to LSEG data).

While many aerospace firms are striving to boost output, Boeing is still recovering from years of crisis and controversy (link) that damaged its reputation, depleted its cash, and left it saddled with heavy debt loads.

Investment analyst Tony Gabelli of Gabelli Funds said that despite strong demand for jets and the fact Boeing has only one major rival—Airbus of Europe AIR.PA —these developments may push investors to sell the stock.

He stated that the market will punish any delays in cash-flow improvement.

Jefferies analyst Sheila Kahyaoglu wrote in a research note on Tuesday that, due to lower deliveries and increased capital investment, Boeing expects to generate $3 billion in cash flow next year, well below Wall Street’s $5.5 billion consensus estimate.

The company’s free cash flow last quarter was $464 million; year-to-date, it has burned through $359 million, but still expects to generate $2 billion by year-end.

According to data compiled by LSEG, Boeing reported adjusted quarterly losses of $0.34 per share as of September, compared with market estimates for a loss of $0.21.

At midday trading, Boeing shares fell 9.6% to $170.23, marking its worst daily performance since April 3, 2025.

Production challenges

Boeing now expects to reach a 737 production rate of 47 jets per month in early 2027. As recently as May, Boeing executives had said they would reach that rate by this summer (link).

Therefore, Boeing will not meet its goal of delivering 500 planes this year, CFO Jay Malave said in a Tuesday call with analysts.

Ortberg said on the call that wing production remains the biggest constraint, but Boeing still aims to increase output to 52 planes per month in the second half of 2027.

To achieve this, Boeing needs to produce 5 jets per month at the new 737 line in Everett, Washington— which launched in July (link)—and raise fuselage production at the former Spirit AeroSystems plant in Wichita, Kansas. Boeing acquired Spirit last year, in part because of ongoing serious manufacturing flaws at the facility.

Ortberg said Boeing is currently drawing down inventories, resulting in the temporary lower fuselage output. From now on, Boeing must increase production at the Wichita factory to keep pace with 737 output.

Deliveries of this popular single-aisle jet are the main engine of Boeing's cash flow. Before Ortberg joined in 2024, Boeing had sacrificed quality for speed, fueling years of production problems.

Despite pressure to quickly ramp up 737 output, Ortberg said: "We will be prudent, disciplined, and are optimistic about the outlook."

The company still faces challenges on the 787 program, and according to a Reuters report last Friday (link) , a supplier dispute has stalled wing production for the 777 freighter and 767 series, including the KC-46 tanker.

Malave said the supply of wings has now resumed, but the impact of the disruption will be seen "over the next several quarters."

Boeing expects the 777-9 jet to receive regulatory certification as planned in mid-2027 and deliver 10 to 15 units next year.

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Quarterly loss exceeds expectations

The gloomy outlook and greater-than-expected quarterly loss overshadow Boeing’s notable achievements in recent months: US regulators approved certifications of the 737 MAX 7 (link) and MAX 10 (link), and the company won the contract for the US Navy’s sixth-generation F/A-XX fighter (link).

“Market expectations are rising, which is only right. We have a stronger foundation than a year ago, but there’s more work to do to clear the backlog, build a stronger culture and improve daily operations,” Ortberg said in a post-earnings memo to staff.

Revenue at Boeing Commercial Airplanes fell slightly to $10.7 billion, while operating losses hit $697 million, and the operating margin was negative 6.5%, compared to negative 48.3% last year.

The company attributed the performance to deliveries of lower-margin jets and rising production costs, including higher supply chain expenses.

In the Boeing Defense division, increased deliveries, improved performance, and the $252 million sale of subsidiary HRL Laboratories combined to generate nearly $500 million in quarterly profit, with an operating margin of 6.2%, up from 1.7% a year ago.

Boeing Global Services posted $1 billion in profit with an 18.3% operating margin.

By the end of the quarter, the US plane maker’s net debt stood at $25.2 billion, a slight decrease from $25.9 billion last quarter and $30.4 billion one year ago.

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