Boeing Shares Decline After CFO Walks Back 2024 Cash-Flow Target

Just months after ending a five-year hiatus, Boeing Co. has again stopped delivering airplanes to customers in China, a fresh roadblock in the company’s push to restore its battered reputation. The halt stems from requests by the Civil Aviation Administration of China for additional information related to batteries used in cockpit voice recorders, Boeing’s Chief Financial Officer Brian West said at a Wolfe Research conference Thursday. [caption id="attachment_56868411" align="aligncenter" width="2560"] Boeing will hand over a report next week to the FAA on how it is addressing the quality control issues. (Courtesy/Boeing)[/caption] Boeing hasn’t delivered planes to China recently as a result, depriving the planemaker of a key source of cash. Full-year cash flow in 2024 is now expected to be negative, West said, reversing an earlier projection for positive full-year cash generation. “There’s not going to be a step up,” in second-quarter aircraft deliveries, West said. News of the China halt and the poorer financial outlook sent Boeing shares down 7.6% in New York on Thursday, the most in more than four months. The stock is down 34% this year, the second-worst performance in the Dow Jones Industrial Average. The holdup with China’s aviation safety regulator represents a new battlefront for Boeing as it works to recover from a January accident in which a fuselage panel blew off a 737 Max mid-flight. The planemaker has come under fire from regulators, lawmakers and airlines as the incident brought to light quality and safety lapses at its factories, and triggered the impending departure of Chief Executive Officer Dave Calhoun as well as the exits of Chairman Larry Kellner and the head of its commercial airplane business. The company is expected to present a comprehensive plan to address production lapses to the US Federal Aviation Administration next week. FAA Administrator Michael Whitaker is slated to brief lawmakers about Boeing’s plan on June 4, according to people familiar with the matter. Deliveries to China are vital source of cash for the planemaker. The market is also key to whittling down Boeing’s stockpile of already built 737 Max planes stemming from the global grounding triggered by two fatal crashes in 2018 and 2019 and the Covid-19 pandemic that followed. Boeing only resumed deliveries of the 737 Max to China in January, nearly five years after Beijing banned the aircraft from flying in the wake of fatal crashes in Indonesia and Ethiopia. West said in April that the company would generate free cash flow “in the low single-digit billions,” for the full year as it ramps up deliveries again. He had also predicted that the second-quarter cash burn would “improve sequentially.” On Thursday, he said Boeing’s cash burn in the current period will be similar or worse than the first quarter, when Boeing ran through almost $4 billion. The China delivery pause and the still-slow rate of 737 Max production will hold second-quarter aircraft shipments in line with the first three months of the year, West said. Boeing delivered 83 planes in that span, the least since mid-2021. Improvement Ahead Despite the setback, West said cash flows will turn positive in the second half of the year as it increases 737 output and factory improvements take hold. “Our operational and financial performance is going to get better, and it’s going to accelerate as we go through the third and fourth quarter,” West said. “I understand everyone would wish it would go faster, but it’s a long cycle business, and we have to be disciplined.” The company still expects to win certification for its 777X widebody model in 2025, West said. Some customers have been concerned that that model — already five years late — may be further delayed as Boeing grapples with its many problems. The company is also experiencing part supply issues on its 787 model, including with heat exchangers and seats, though the problems won’t hurt the overall delivery schedule of the widebody model, West said. West said he’s still optimistic that Boeing can “get something done” with Spirit AeroSystems Holdings Inc. in the second quarter to reintegrate its most important supplier. While “nothing is off the table” in terms of financing the deal, the company is keen to retain its investment-grade credit rating, he said. Boeing’s cash burn in the first quarter prompted Moody’s Ratings to cut the company’s credit rating to the brink of junk. The planemaker subsequently raised $10 billion from a bond sale.

Boeing Shares Decline After CFO Walks Back 2024 Cash-Flow Target

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