Aircraft maker Boeing (NYSE:BA) impressed investors with better-than-anticipated first-quarter revenue. However, the company cautioned that the recently disclosed production problem related to its 737 jets would impact the timing of its deliveries over the next several months and adversely hit the summer flying capacities of its customers.
“Unfortunately, the timing of these delivery shortfalls will impact summer capacities for many of our customers, and we feel terrible about that,” said Boeing CEO David Calhoun during the Q1 2023 earnings call.
Near-Term Disruption
The CEO stated that the company is making progress in its early inspection of the affected airplanes. He added the issue is related to two specific fittings on the fuselage of the 737. While the remedial efforts are anticipated to impact deliveries over the next several months, Boeing continues to expect to deliver between 400 and 450 737 airplanes this year.
Boeing plans to cover up the lower near-term deliveries by increasing its production rate to 38 737 jets per month later this year. The company stated that April and Q2 2023 deliveries would be lower, with the first-half monthly average projected to come in at about 30 airplanes. It expects second-half deliveries to be about 40 per month, driven by sequential quarterly improvement in the back half.
Boeing stated that it is supporting its fuselage supplier Spirit AeroSystems (NYSE:SPR) by offering manufacturing and engineering resources and a cash advance through this recovery.
Overall, Boeing aims to ramp up its production to about 50 737 jets by 2025 or 2026. The company delivered 113 737s in Q1 2023, up 31% year-over-year.
Boeing expects its free cash flow in the breakeven to slightly negative range in Q2 2023 as it works through the 737 recovery. Nonetheless, it maintained its full-year free cash flow outlook between $3 billion and $5 billion. The company assured that it remains on track to achieve its long-term free cash flow guidance of $10 billion in the 2025 to 2026 time frame.
Is Boeing a Buy, Sell, or Hold?
Wall Street is cautiously optimistic on Boeing stock, with a Moderate Buy consensus rating based on 10 Buys, five Holds, and one Sell. The average price target of $230.87 suggests 13.7% upside.
