Despite bad headlines, Boeing stock bounces on Q1 results

It is hard to imagine a company enduring worse headlines last quarter than Boeing (NYSE:BA), but the embattled airplane manufacturer posted some unexpectedly positive news on Wednesday in the form of a decent earnings report.

You’ve probably seen the headlines: most notably, the news in January that a door panel flew off one of Boeing’s planes in mid-flight. Thankfully, no one on the Alaska Airlines flight was hurt.

Boeing has been under investigation by federal regulators and was forced to testify before Congress about this and other safety issues for quite some time. The company has also struggled financially, posting another loss in the first quarter and for fiscal 2023.

Last month, Boeing announced that CEO Dave Calhoun is stepping down at the end of the year, while Stan Deal, CEO of Boeing Commercial Airplanes, retired immediately, and Board Chair Larry Kellner will not run for re-election.

However, Boeing stock jumped at the opening bell on Wednesday after the company reported earnings and revenue for its fiscal first quarter that beat estimates. The shares climbed almost 5% at the opening bell to over $177 before settling back down to around $173 per share in morning trading, still up by about 3%.  

Fixing the problems at Boeing

While Boeing’s earnings results beat expectations, they still weren’t great. The airplane manufacturer’s revenue fell 8% year over year to $16.6 billion, while it posted a $355 million net loss. It also reported -$3.4 billion in operating cash flow and -$3.9 billion in free cash flow.

Those results were largely due to Boeing management’s decision to reduce the volume of deliveries in an effort to ensure higher safety standards.

“Our first-quarter results reflect the immediate actions we’ve taken to slow down 737 production to drive improvements in quality,” Boeing President and CEO Dave Calhoun said in the earnings report. “We will take the time necessary to strengthen our quality and safety management systems, and this work will position us for a stronger and more stable future.”

In its commercial airlines business, deliveries dropped 36% while revenue fell 31%. Boeing booked 125 net orders during the first quarter, including an order from American Airlines for 85 of its 737-10 airplanes and orders for 28 of its 777X airplanes from various customers, including Ethiopian Airlines. Overall, Boeing delivered 83 airplanes during the quarter, and its backlog consisted of more than 5,600 planes valued at $448 billion.

Business was better in the defense, space and security division, as revenue jumped 6% to $7 billion with net income of $151 million, up from a $212 million net loss a year ago this quarter. Boeing also won contracts for 17 of its P-8A Poseidon aircraft for the Royal Canadian Air Force and German Navy and secured a production contract from the U.S. Navy for 17 of its F/A-18 Super Hornets, among other contract wins.

Boeing’s defense, space and security segment has a $61 billion backlog, with 31% of its orders coming from customers outside the U.S.

What’s next for Boeing?

It has been a difficult year for Boeing, to say the least. The company’s stock price has plunged some 32% year to date and is off by about 15% over the past year.

Wednesday’s uptick in Boeing shares was likely related to the actions it is taking to address the safety concerns and its huge backlog in orders. The sizable backlog should bode well for earnings in future quarters.

Boeing is also just one of two major airline manufacturers, so it is not going anywhere. However, it is also headed into a transition period, not only with its production of new aircraft but also within its leadership.

Today’s bit of good news may have given Boeing a temporary lift, but there is still a lot of heavy lifting to do, and investors should be cautious. It has the potential to be a good value stock, but it might be a good idea to wait for more movement toward profitability.