Boeing Q3 Loss Widens on Commercial Aircraft Production Snags

Boeing (BA) reported a wider-than-expected third-quarter loss as persistent supply-chain and production challenges in its commercial airplane division offset strong performance in its defense and services units. According to a report from Reuters, the news sent the planemaker's shares down 2.5% in premarket trading on Tuesday.

Quarterly Performance by the Numbers

The company posted an adjusted loss of 34 cents per share for the quarter ending in September, missing analyst expectations of a 21-cent loss, according to data compiled by LSEG. The miss was driven primarily by the Boeing Commercial Airplanes segment, which recorded an operating loss of $697 million.

While the commercial division struggled, other parts of the company showed considerable strength:

• Defense, Space & Security: The division earned nearly $500 million with an operating margin of 6.2%, a significant improvement from 1.7% a year ago.
• Global Services: This unit generated $1 billion in earnings and posted a strong operating margin of 18.3%.

Production Headwinds Persist

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Boeing attributed the commercial division's weak performance to a mix of less profitable jetliner deliveries and higher production costs linked to its supply chain. The company has been struggling to increase production of its 737 jet from 42 to 47 aircraft per month, a target it had hoped to reach during the summer.

At an industrial conference in September, CEO Kelly Ortberg noted that the company has not been able to manufacture wings fast enough to meet its production ramp-up goals, highlighting the specific bottlenecks affecting its most popular aircraft program.

Broader Context and Outlook

Despite the production issues, Boeing highlighted several positive developments. The company secured U.S. regulatory certification for the 737 MAX 7, won the U.S. Navy’s sixth-generation F/A-XX fighter contract, and generated positive free cash flow for another quarter. The company also continued to strengthen its balance sheet, reducing its net debt to $25.2 billion from $30.4 billion a year prior.

In a memo to employees, CEO Kelly Ortberg acknowledged the ongoing work needed. "We have a stronger foundation than a year ago, but we also have more work to do to deliver on our backlog, strengthen our culture, and improve how we work every day," Ortberg stated.