Boeing Faces Costs in Aviation Division... Stock Expected to Remain Weak for a While

Negative Impact of 787 Dreamliner Delivery Delays

Boeing clearly written on the aircraft fuselage

[Asia Economy Reporter Minji Lee] Boeing reported earnings that fell short of market expectations due to weakness in its aviation division. Additional costs are expected to arise from production delays of the 787 Dreamliner aircraft, suggesting that the stock price will likely show a subdued trend for the time being.

According to the financial investment industry on the 30th, Boeing's stock price stands at $190.57. It dropped about 4% following the earnings announcement on the 27th, which is analyzed to be due to a large volume of sell-offs triggered by losses reported that were worse than market expectations.

In the fourth quarter, Boeing's revenue was $14.79 billion, down 3.3% year-over-year. It recorded a Non-GAAP operating loss of $4.54 billion, continuing its operating losses from the previous year. Earnings per share (EPS) remained negative at -$7.02. Seongjin Ji, a researcher at Kiwoom Securities, said, "Both revenue and EPS significantly missed market expectations," adding, "There were $3.5 billion in costs related to managing delays in 787 deliveries and $400 million in costs related to the KC-46A tanker."

In the aviation (BCA) division, revenue was $4.75 billion, similar to last year. The delivery of 99 aircraft in the quarter (up from 62 in the previous quarter), mainly the small 737 MAX models, increased, but revenue growth was minimal. Profitability worsened due to delays in delivering the large 787 Dreamliner, resulting in an operating loss of $4.45 billion. The company mentioned that approximately $2 billion in additional costs could occur through 2023 due to Dreamliner production delays. Youngho Kim, a researcher at Samsung Securities, estimated that the total costs related to Dreamliner quality defects could reach $55 billion, but noted, "The encouraging part is that in Q4, 164 units of the 737 MAX and 24 cargo planes were newly ordered, expanding the backlog to $279 billion."

In the defense (BDS) division, revenue was $5.86 billion, falling short of the market expectation of $6.34 billion due to increased costs related to the KC-46A tanker program and decreased aircraft deliveries. Researcher Ji explained, "With the BDS division, which had been driving overall performance, experiencing revenue decline and turning to losses, the importance of performance improvement in the BCA division has grown even more." New orders amounted to $700 million, bringing the total backlog to $60 billion.

The global services (BGS) division recorded revenue of $4.3 billion, growing 16.2% year-over-year due to increased demand for cargo aircraft modifications, marking the only segment to post a profit. Thanks to increased sales in the civilian sector, the backlog grew by $6 billion in Q4 to a total of $20 billion. Cash flow was about $700 million, marking the first positive cash flow since Q1 2019.

To boost the stock price, expanded aircraft deliveries are necessary. The imminent approval for 737 MAX operations in China, where deliveries have resumed, is positive, but the inventory of completed aircraft remains at about 335 units, making delivery expansion essential. The ongoing costs related to the 787 Dreamliner, which negatively impact earnings, remain a burden. Researcher Seongjin Ji analyzed, "Significant earnings improvement is expected in the second half of this year after expanded deliveries of the 737 MAX in China and FAA approval for resuming deliveries of the 787 MAX."

This content was produced with the assistance of AI translation services.