Boeing, the aircraft giant, reported a $650 million operating loss in the fourth quarter in Boeing Q4 Earnings result. This was unexpected as Wall Street analysts had forecasted a profit for the company.
Reasons for Boeing Loss
The company blamed the loss on “abnormal production costs” as it attempted to deliver the remaining backlog of 737 Max jets and to increase deliveries of the 787 Dreamliners. The production of the 787 remains below normal rates. Additionally, the company had to pay an unspecified amount of compensation to 787 customers whose deliveries were delayed by about a year.
Impact of 737 Max Crisis
Boeing has only reported two profitable quarters in the nearly four years since the grounding of the 737 Max. After two fatal crashes that killed 346 people, the jet was grounded for 20 months starting in March 2019. The pandemic further decreased demand for flying and new aircraft, leading to the cancellation of hundreds of jet orders and losses for Boeing.
Impact on the Industry
The industry has shown signs of recovery, and analysts surveyed by Refinitiv had forecast that Boeing would earn 26 cents a share. Instead, it reported a loss of $1.75 a share. This is an improvement from the loss of $7.69 a share in the fourth quarter of 2021, but still a disappointment.
Specific Problems
Boeing’s problems in the fourth quarter are tied to its difficult few years since the 737 Max crisis. The company was left with excess inventory of hundreds of the jets, as it continued to build them during the grounding to keep its suppliers in business. The company also had to find new buyers for some of those planes due to customers canceling orders during the pandemic. Additionally, the FAA flagged quality problems with the company’s 787 Dreamliners that stopped it from delivering that model.
Outlook
The supply chain problems are improving, but CEO Dave Calhoun suggests that more money-losing quarters may be ahead despite a rebound in demand. He expects Boeing to have “bouncy” margins throughout the year as its Max and Dreamliner inventories are cleared.
The company delivered 152 commercial jets in the quarter, up 54% from a year ago, but it appears that Boeing received lower prices on some of its planes than analysts had expected, as the company’s revenue fell short of forecasts. Despite the disappointing results, the company pointed out that this was the first full year of positive operating cash flow since the start of the 737 Max crisis and reaffirmed its guidance for 2023 of positive operating cash flow of between $4.5 billion to $6.5 billion.
The shares of Boeing (NYSE: BA) decreased by 2.69% during the morning trading session.
FAQ: Boeing Q4 Earning Result
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What caused the operating loss for Boeing in the fourth quarter?
The unexpected loss was caused by “abnormal production costs” as the company tried to deliver the remaining backlog of 737 Max jets and to increase deliveries of the 787 Dreamliners. The company’s production of the 787 remains below normal rates, and they had to pay an unspecified amount of compensation to 787 customers whose deliveries were delayed by about a year.
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How has the 737 Max crisis affected Boeing’s profitability?
Boeing has reported only two profitable quarters in the nearly four years since the grounding of the 737 Max, which was caused by two fatal crashes that killed 346 people. The grounding lasted for 20 months starting in March 2019, and the pandemic further decreased demand for flying and new aircraft, leading to the cancellation of hundreds of jet orders and losses for the company.
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What specific problems did Boeing face in the fourth quarter?
Boeing was left with excess inventory of hundreds of 737 Max jets, as it continued to build them during the grounding to keep its suppliers in business. The company also had to find new buyers for some of those planes due to customers canceling orders during the pandemic. Additionally, the FAA flagged quality problems with the company’s 787 Dreamliners that stopped it from delivering that model.
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Are the supply chain problems for Boeing improving?
The supply chain problems are improving, but CEO Dave Calhoun suggests that more money-losing quarters may be ahead despite a rebound in demand. He expects Boeing to have “bouncy” margins throughout the year as its Max and Dreamliner inventories are cleared.
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Did Boeing meet its delivery target in the fourth quarter?
Yes, Boeing delivered 152 commercial jets in the quarter, which is up 54% from a year ago and better than its own target. However, it appears that Boeing received lower prices on some of its planes than analysts had expected.
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What is the outlook for Boeing in the future?
Boeing is focusing on driving stability in its operations and within the supply chain to meet its commitments in 2023 and beyond. The company pointed out that this was the first full year of positive operating cash flow since the start of the 737 Max crisis and reaffirmed its guidance for 2023 of positive operating cash flow of between $4.5 billion to $6.5 billion. While there are still challenges ahead, the company is well-positioned and on the right path to restoring its operational and financial strength.
