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April 29, 2020, 12:55 p.m. EDT

Boeing stock rallies as Wall Street focuses on plane maker’s cash flow

Boeing surge helps give Dow industrials a boost

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By Claudia Assis, MarketWatch


Getty Images
A Boeing 737 Max 8 outside Boeing’s factory in Washington last year.

Boeing Co. investors zeroed in on the few positives to be found in the aircraft maker’s first-quarter results, with the fact that the company didn’t use up as much cash as Wall Street feared at the top of the list.

Boeing /zigman2/quotes/208579720/composite BA +6.83%  shares surged in premarket trading and held on to outsize gains into the Wednesday session, among the top gainers for the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +1.34% . The stock was recently up 9%, its best in two weeks.

Earlier Wednesday, Boeing posted a net loss of $641 million, or $1.11 a share, in the quarter, contrasting with net profit of $2.15 billion, or $3.75 a share, in the year-ago period. The aircraft maker reported an adjusted loss of $1.70 a share. Revenue fell 26% to $16.91 billion.

Ahead of the report, analysts polled by FactSet had expected an adjusted loss of $1.60 on sales of $17.33 billion.

Boeing, still reeling from the world-wide grounding of its 737 Max aircraft, has struggled amid the coronavirus pandemic as travel ground to a halt and its airline customers delay or forgo plane orders. It has had to shut down plants, although it has reopened some with restrictions in place.

Not surprisingly, first quarter “was an ugly quarter for Boeing,” Vertical Research Partners analyst Robert Stallard said in a note. “We think investors were braced for an EPS loss and free cash outflow in the first quarter, but the chances are that things will get worse before they get better.”

Boeing’s free cash flow swung to a negative $4.73 billion from positive $2.29 billion, beating the FactSet consensus of negative $5.79 billion.

The free cash was “better than levels we heard investors concerned with in recent weeks,” analysts at Goldman Sachs said in a note. Moreover, Boeing said it is exploring additional sources of near-term liquidity, and that it believes it will be able to obtain it, the analysts said.

Sales from its commercial-airplane business fell 48% to $6.21 billion, topping expectations of $5.94 billion, while defense, space and security revenue declined 8% to $6.04 billion versus expectations of a rise to $6.76 billion.

Boeing’s commercial aircraft production rates are coming down about 25% on average, but are not as bad as feared, analysts at Jefferies said in their note.

For the grounded 737 Max, Boeing said it plans to resume production at a low rate this year and gradually increase it to 31 planes a month in 2021, which compares to the Jefferies estimate of ramp to production of 27 of the aircraft a month.

That expects that the planes, removed from service in March 2019 after two deadly crashes, would win back regulatory approvals in time for deliveries to resume in the third quarter, the analysts said.

There was no official change on the Max timeline. A recent report on The Wall Street Journal said that the return is unlikely before late summer or early fall.

Boeing has resumed operations in Washington state and South Carolina facilities, with the company saying it made modifications to ensure employee’s safety and to keep with social-distancing and cleanliness guidelines.

Shares of Boeing have lost 62% in the past 12 months and 56% over the last three months, which compares with losses of 7% and 14% for the Dow in these same periods. Boeing is a Dow component.

/zigman2/quotes/208579720/composite
US : U.S.: NYSE
$ 156.03
+9.98 +6.83%
Volume: 29.12M
Sept. 25, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
0.00%
Market Cap
$88.07 billion
Rev. per Employee
$660,961
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/zigman2/quotes/210598065/realtime
US : Dow Jones Global
27,173.96
+358.52 +1.34%
Volume: 391.73M
Sept. 25, 2020 5:06p
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Claudia Assis is a San Francisco-based reporter for MarketWatch. Follow her on Twitter @ClaudiaAssisMW.

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