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Boeing’s second-quarter financial results “possibly” could be even worse than the first quarter’s, “and that’s going to be hard to make up,” the company’s chief financial officer (CFO) warned Wall Street on May 23.
What is more, for all of 2024, Boeing now expects to see a use of cash compared with potential net cash generation from operations for the year.
CFO Brian West’s latest comments reflect a continuing resetting of expectations downward, as well as marking 2024 as a rebuilding year in more ways than one, including financially.
“As we enter 2025, we’ll be more or less in the spot where we thought we were this year, but with a much stronger foundation,” West told the Wolfe Research Global Transportation and Industrials Conference. “The payoff, if we do this right, will be big beyond 2025, and that is what we’re aiming at.”
Asked whether full-year cash use would mean a negative free cashflow total for 2024, West said that it remains to be seen.
“There are specific things that we can point to that we know are going to accrue to our benefit in the second half,” West said. “It might not make it all up, but it’s going to get better.”
He cited operational improvements in airliner manufacturing, an expected U.S. Air Force payment regarding the KC-46 program, less-negative operating margins at Boeing’s defense and space unit, and continued robust performance by Boeing’s small aftermarket-focused division.
According to Investopedia, cash “use” refers to the operating cash flow generated by a company’s business operations. Free cashflow is the difference between what the businesses generate, and what remains for the company after paying capital expenditures.
As recently as March, West had told Wall Street that full-year free cashflow was eyed around “low single-digit” billions of dollars. Of course, analysts at the time were expecting around $5 billion free cashflow for this year, on the way to a stated goal of $10 billion by 2025-2026.
West has not abandoned that $10 billion free cashflow goal, but he has admitted that it will likely come later rather than sooner. Still, analysts continue to wonder whether it means $10 billion total free cashflow for 2026, or whether Boeing will declare victory simply by generating $10 billion-plus in operating cash that year while not hitting the free cashflow goal until 2027 or beyond.
Analysts increasingly see the latter. “Given the importance of the 737 and the 787 to the $10 billion, it is probably no surprise that we see the challenges on these programs being principally responsible for the free cashflow shortfall,” analysts at Vertical Research Partners said May 23 before West spoke. “Our 2026 free cashflow forecast of [around] $8 billion reflects a view that Boeing will not get to its targeted build rates on either program by that date, and that it will face a combination of higher costs (staff, materiel, regulatory) and negative 737 price mix.”
In other developments, West predicted that Boeing and its leading supplier Spirit AeroSystems will sign a memorandum of agreement for Boeing’s acquisition of Spirit before the end of June. However, closing the deal will take time and include efforts to convince credit rating agencies not to cut their grades of Boeing’s debt to junk status. He evoked optimism that ongoing 737, 787 and other operating improvements will help get there.
“The most important thing is that we’re going to maintain investment-grade, and what the optimal financing looks like to maintain that investment grade is what we’re going to aim at,” West said. “The benefit is that between sign and close, we’ve got time.”
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