Boeing Shares Decline After CEO Flags Production and Cash Flow Concerns

Shares of Boeing (NYSE: BA) fell 6% on Wednesday after President and CEO Kelly Ortberg highlighted significant operational and financial challenges at the Morgan Stanley Laguna Conference, raising investor concerns about the aerospace giant's recovery pace.

Production and Cash Flow Headwinds

Ortberg disclosed that Boeing has not yet stabilized production for its key 737 program at the target rate of 47 aircraft per month. He specifically identified wings production as a constraint that is impeding the company's ability to ramp up output.

These production difficulties are directly impacting the company's financial outlook. Ortberg stated that achieving free cash flow above $2 billion is now considered "less likely." While Boeing maintained its full-year guidance of $1 billion to $3 billion in free cash flow, the CEO's comments suggest the final figure will probably land at the lower end of that range.

Key Program Updates

The CEO provided updates on several critical aircraft programs, outlining both progress and potential risks:

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• 737 MAX 10: Certification for this variant, which represents about 30% of the 737 backlog, is expected "very soon," as all flight testing has been completed.
• 777X: Testing for certification is ongoing and some activities are expected to extend into 2027. However, the company is still targeting initial deliveries for 2027.
• 787 Program: Ortberg noted potential delays in engine deliveries for the Dreamliner.
• Defense: The company faces some risk of incurring charges on its defense programs.

Labor and Market Context

Boeing is also navigating sensitive labor negotiations with the SPEEA union and is working to avoid a work stoppage. Ortberg warned that a strike would shut down the crucial 777X certification program, adding another layer of risk to the timeline.

On a more positive note, the CEO mentioned that Boeing is receiving an "increment" of new orders from China. Still, the collection of challenges underscores the persistent operational hurdles the manufacturer faces as it works to stabilize its supply chain and restore investor confidence.