Boeing's fourth quarter performance exceeded expectations, repeatedly emphasizing "safety" issues and suspending the release of New Year's financial guidelines.
On January 31st, global aircraft manufacturer Boeing announced its fourth quarter and full year results for 2023 before the US stock market. Boeing achieved a revenue of $22.018 billion in the fourth quarter of last year, a year-on-year increase of 10.2%, higher than market expectations. The net loss attributable to the parent company was 23 million US dollars, a year-on-year decrease of 96.37%; Adjusted loss per share of $0.47. Free cash flow of $3 billion exceeded market expectations.
Last year's performance improved due to increased sales, with Boeing achieving a revenue of $77.794 billion for the full year of 2023, a year-on-year increase of 16.79%. The net loss attributable to the parent company was 2.222 billion US dollars, a year-on-year decrease of 54.97%.
Boeing's performance
It is worth noting that Boeing has temporarily suspended the release of 2024 financial guidelines or delivery forecasts, and emphasized that the focus in the near future is "safety". Boeing CEO David Calhoun stated during the earnings conference call that previously, financial operational goals would be updated at this point every year, but now is not the time to do so. Boeing will focus on every aircraft while doing everything possible to support customers, follow regulatory leadership, and ensure that everything Boeing does meets the highest safety and quality standards, ultimately driving performance growth.
At the same time, Boeing reiterated its financial goals for 2025 and 2026 set on Investor Day in 2022, which are to achieve approximately $10 billion in free cash flow, $100 billion in revenue, and a monthly production of 50 737s as early as 2025. Boeing Chief Financial Officer Brian West stated during the earnings conference call, "Boeing remains confident in its set targets for 2025 and 2026, although it may take longer than initially anticipated, and we will not act hastily."
As of the close on January 31st, Boeing was trading at $211.04 per share, up 5.29%, and its stock price surged to a high of 6.6% during the trading session. Boeing's stock price has fallen by over 19% this year, possibly due to safety accidents.
Commercial aircraft business saw a 30% increase in revenue last year, slowing down production speed to address quality issues
Specifically, Boeing's commercial aircraft business revenue increased to $10.481 billion in the fourth quarter of last year, a year-on-year increase of 13%, accounting for 47.6% of total revenue. The operating income was 41 million US dollars, achieving a turnaround. In the same period of 2022, it was -603 million US dollars, with an operating profit margin of 0.4%, compared to -6.5% in the same period last year. Throughout the year, Boeing's commercial aircraft business revenue increased to $33.901 billion, a year-on-year increase of 30%, accounting for 43.58% of the total revenue. The operating profit margin was -4.8%, compared to -9% in the same period last year.
Commercial Aircraft Business Performance
The financial report indicates that the revenue growth of the commercial aircraft business is mainly due to the increase in delivery volume and favorable combination, and the operating profit margin also reflects the improvement of performance and the reduction of abnormal costs.
According to the financial report, Boeing's overall research and development expenses last year were $3.377 billion, an increase of over 2.8 times year-on-year. The cost of commercial aircraft business was 2.036 billion US dollars last year, a year-on-year increase of 34.83%, accounting for over 60%.
Research and development expenses
This performance release mentions the recent Alaska Airlines accident, which has once again pushed Boeing into a whirlpool of public opinion. The CEO of Boeing admitted during the earnings conference call that the accident was caused by the company. Although the investigation into the root cause of the accident is ongoing, he emphasized that the ultimate responsibility lies with Boeing.
The Boeing CEO also stated that the "door stopper" issue that caused the Boeing quality crisis has been fully controlled, and stated that out of 171 MAX 9 aircraft grounded by the FAA earlier this month, 129 have resumed use.
On January 5th of this year, an Alaska Airlines Boeing 737 MAX 9 aircraft flew from Portland to Ontario, California on the same day. The cabin door fell off during the flight, causing the aircraft to make an emergency landing. Subsequently, the FAA ordered the grounding and inspection of 171 Boeing 737 MAX 9 aircraft worldwide. Recently, some airlines have resumed regular operational services for the 737 MAX 9, but FAA has also stated that it will temporarily limit production of the Boeing 737 MAX. "Boeing's business will not return to normal. Until quality control issues are resolved, FAA will not agree to Boeing's request to expand production or approve the addition of the 737 MAX production line."
On January 31st, the FAA issued a statement stating that it will review Boeing's 737 MAX factory in Leighton, Washington and Spirit aviation system facilities in Wichita, Kansas, to review Boeing's production and manufacturing quality system as well as assembly lines, including areas where the two companies have previously implemented corrective measures. The FAA did not disclose how long the stricter review will last. According to reports, most of the fuselage of the Boeing 737 MAX 9 aircraft involved was produced by Spirit.
The financial report also pointed out that after the 737 MAX 9 accident, Boeing continued to cooperate with FAA, and Boeing's commercial aircraft department is taking action to strengthen the quality of 737 series aircraft, including requiring additional inspections at factories and major suppliers, and supporting airline customers to expand supervision. And suspend production of 737 for one day, allowing employees to refocus their attention on quality. The company has also appointed an external expert to lead an independent and in-depth evaluation of Boeing's commercial aircraft quality management system, and provide recommendations directly to Calhoun and the Boeing Board Aerospace Safety Committee.
Due to the impact of two previous air disasters from October 2018 to March 2019, Boeing has gradually fallen behind Airbus in the competition for best-selling aircraft models in the past two years. The door detachment incident during the 737 MAX 9 flight has raised concerns that it may hinder the growth of MAX 8 production, which is a major source of revenue for Boeing and many suppliers. Delaying production increase may affect the addition of the originally planned fourth 737 MAX production line this year. In addition, Boeing's production cannot increase as planned or further affect the airline's operational recovery. Major customer airlines have expressed that they may seek future aircraft procurement from other aircraft manufacturers.
In this financial report conference call, Calhoun repeatedly stated that if quality issues need to be resolved, the company must be willing to slow down. "We won't predict time. We won't be ahead of regulatory agencies, we will slowly move faster."
Last year, the number of commercial aircraft delivered increased by 10% year-on-year, and it is expected that cash flow will remain stable this year
In terms of orders, according to this financial report, Boeing received a net order of 611 aircraft in the fourth quarter of last year, including 411 737s, 98 777X and 83 787 aircraft, and delivered 157 commercial aircraft, a year-on-year increase of 3%. Throughout the year, 528 commercial aircraft were delivered in 2023, a year-on-year increase of 10%, with a net order of 1576. The company's backlog of orders increased to $520 billion, including over 5600 commercial aircraft.
The financial report also pointed out that the current production capacity of 787 is 5 aircraft per month; The 737 series aircraft will continue to be delivered with a monthly production capacity of 38 aircraft. The Chief Financial Officer stated during the earnings conference call that Boeing has approximately 200 737 MAX and 60 787 aircraft in stock, with the majority expected to be delivered this year.
According to foreign media reports, although Boeing has a production cap, Boeing executives have stated that they will continue to produce 737 aircraft at the higher speed specified in their plan, which requires production to increase to 42 aircraft per month in February. Boeing's previous goal was to produce approximately 50 737 aircraft per month by 2025 or 2026.
In addition, the financial report also pointed out that certification flight testing of the 737 MAX 10 began in the fourth quarter of last year, and production of the 777 X project resumed. During the conference call, Boeing executives refused to disclose the new certification schedules for MAX 7 and MAX 10, as certain systems of these two aircraft need to be redesigned before they can be put into use. However, West stated that the "engineering solution" for MAX 7 may be completed within a year. Calhoun stated that the certification progress for MAX 7 and 10 has been quite smooth.
West also added that Boeing expects its cash flow to remain stable this year based on the current monthly production of 38 737 aircraft and the delivery of 737 and 787 in inventory.
According to a previous report by The Paper, some analysts pointed out that delivery speed is crucial for Boeing to achieve its cash flow goals, as customers pay for most of the aircraft's costs during delivery. Whether this goal can be achieved in the current context of limited production capacity still needs to wait for time to be verified.
According to foreign media reports, analysts predict that if Boeing delivers 545 737s and 84 787s in 2024, Boeing will accumulate $5.5 billion in free cash flow in 2024. However, this prediction is based on the premise that Boeing can increase 737 production to 42 per month in the second half of the year.