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Thursday, February 22, 2024

Boeing shares soar on increased plane production

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Wednesday saw a 6.7% gain in shares of US aerospace giant Boeing to a new 52-week high after the firm reported a smaller-than-expected loss, announced production rate improvements on important commercial jets, and described supply chain issues as partly abating.

According to the reports, the US aerospace company disclosed a $149 million second-quarter loss due to delays and cost concerns in its defense and space programs.

Nevertheless, an increase in jet deliveries increased quarterly sales to $19.8 billion, up 18% from the prior level and beyond expert estimates.

The 737 MAX and 787 Dreamliner, two well-known commercial aircraft that have recently struggled with factory and supply chain challenges, have seen production rate increases announced by Boeing. Additionally, Boeing updated its estimates for free cash flow 2023, a key performance indicator for investors.

According to a press release from the company, Chief Executive Dave Calhoun noted “steady progress” in the aerospace giant’s turnaround and cited strong demand.

In a CNBC interview, Calhoun discussed the supply chain issues as “settling down” as he evaluated the ramp-up schedule for the best-selling jets and some significant contracts with carriers in India, Saudi Arabia, and other countries.

Following the Covid-19 lockdowns, airlines have announced additional purchases in response to the strong travel demand. Boeing and Airbus have identified supplier shortfalls and delays as major industry bottlenecks.

Calhoun provided a slightly more optimistic assessment as he outlined the strategy for increasing 737 MAX production to 38 per month from 31 per month on Wednesday.

According to Calhoun, the company hopes to increase output to 50 monthly. “Suppliers have been working diligently to sort of settle down and eliminate the constraints, and slowly and steadily, we’re seeing fewer and fewer concerns,” he said to CNBC.

In a later conference call with analysts, Calhoun stated that while supply chain issues remain the company’s “most significant” challenge, “it’s steadily improving.”

Boeing had a 12% rise in commercial jet deliveries during the second quarter. The commercial program nevertheless posted a quarterly deficit due to “abnormal costs and period expenses, including research and development.”

Due to the Starliner spacecraft’s delays and rising expenses associated with the T-7A jet trainer program, the company’s defense, space, and security division also posted an operating deficit.

Although the company is approaching breakeven, the second quarter was the 15th consecutive operational loss for Boeing’s commercial sector, according to Peter McNally of research firm Third Bridge.

According to a note from McNally, “the overall outlook is unchanged,” and the commercial division’s results are “encouraging, particularly in light of the ongoing supply chain challenges.”

Boeing’s execution has improved, and it will need to keep going in this direction to turn the corner on continuous profitability. Source

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