Yahoo Finance Boeing Co (BA) (Q1 2024) Earnings Call Transcript Highlights: Navigating Challenges and ...
Revenue: $16.6 billion, down 8% from last year.
Core Loss Per Share: $1.13, slight improvement from last year.
Free Cash Flow: Usage of $3.9 billion, higher than last year.
BCA Revenue: $4.7 billion, significantly lower due to decreased 737 deliveries.
BCA Operating Margin: -24.6%, impacted by 737-9 grounding costs.
737 Deliveries: 67 airplanes, production slowed to improve quality and safety.
787 Deliveries: 13 airplanes, with production expected to slow in the near term.
BDS Revenue: $7 billion, up 6% with improved volume.
BDS Operating Margin: 2.2%, showing sequential improvement.
BGS Revenue: $5 billion, up 7% primarily on higher commercial volume and favorable mix.
BGS Operating Margin: 18.2%, an increase of 30 basis points from last year.
Cash and Marketable Securities: Ended the quarter at $7.5 billion.
Debt Balance: Decreased to $47.9 billion after paying down $4.4 billion.
Release Date: April 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q & A Highlights
Q: You gave color on the April MAX deliveries similar to February, but I'm really more interested in the production output, how it's going on the line, where you are relative to where you were when you started to give the no traveled work policy, how that's improving or not? And what specific metrics you're looking at to allow you to go higher over the next 6 months? A: David L. Calhoun - The Boeing Company - President, CEO & Director: It is going to stay sporadic through 2Q. The real pivot for us is the number of clean fuselages we get out of Spirit with the new inspection protocols. It started slow. In the meantime, we've been working on all the fuselages that were already trapped in the pipeline that did not go through that inspection process. So that's why it's slow and lumpy here in these couple of months, but we will be through that process within the next 60 days. And then we will just be dealing with clean fuselages out of Wichita. So far, we're quite encouraged at just how clean they are and how quickly they move through our production cycle, substantially better, faster than before. So as we exit 2Q, we will know exactly what numbers are coming out of Wichita and what expectations are. We are not going to rush it. We're simply going to demand that they be clean. But I like all the signals. I was walking through the factory yesterday. When we get a clean one, it whistles through the factory, and that's the most important thing.
Q: When you look at production on the 737, when you talk about going to $10 billion in free cash flow maybe by late -- by the end of 2026 or even 2027, this seems to be very much contingent on getting to this 50 a month rate. But when you look at that process, if I go back even pre-grounding for the MAX, Spirit had never successfully done a rate break to 50 a month before. And given the restart mode that they're in right now, how do you see the pathway to getting up from where they are today, getting through the quality issues and getting to 50 a month there within 2 years? A: David L. Calhoun - The Boeing Company - President, CEO & Director: We do. Spirit's committed to it. I think the acquisition of Spirit will factor in significantly into that prospect. Clean fuselages in Spirit and in Wichita and fix on all those nonconformances will reduce their cycle and improve their output. So there's a lot of things that contribute to it, Doug. If we get ourselves to 38, which is our first objective, and we do it in a steady fashion moving up another 12 in my view, is doable in the window that we're talking about. So that's the bet we're making, and I'm confident we can get there. But job 1 is the 6 months that commenced post Alaska and the inspection protocols and the nonconformance fixes that are then embedded into the Wichita facility.
Q: Yes. So as a result of the production slowdown, you've had some -- presumably, you'll have late deliveries to customers. And traditionally, late deliveries require compensation. Could you give us some color in terms of what sort of a number we're going to look at? And basically, where are we going to see it? Is that going to be front-loaded, back-loaded? How should we think about that? A: Brian J. West - The Boeing Company - Executive VP of Finance & CFO: Cai, I'll take that one. Why don't we talk about in the context of 737 overall margins? The program booked about 300 basis points of impact in the quarter. And that was primarily driven by the delayed rate ramp that you're describing as well as mixing in more 8s and 9s for 10s in the near term so that we can support our customers in their fleet planning. So that will all roll through, and the timing will be expanded over the next couple of years. What our expectation is that over time that while these program margins won't get back to the 2018 levels, they will expand. And that will largely be driven by the rate ramps that Dave described. And the reason why they'll be different from where they were in 2018 is largely, as you know, is because of the customer mix and these delayed considerations. So all in all, when we step back and think about long term, structurally, particularly on the cash margin front, not a lot has changed. We just have to work through getting from here to those higher levels, including the consideration that we've described that we booked in the quarter. Overall long term, we still think we get there.
Q: Brian, you talked a little bit about the cash balance and liquidity. I don't know if this is necessarily the right way to think about it, but I feel like there's this conventional wisdom out there that Boeing should have roughly $10 billion of cash on the balance sheet. Maybe that can dip a little bit lower intra-year as we see now. But burning cash in the second quarter, kind of how low can that cash balance get before you have to do something? When you talked about additional sources of liquidity, what were you talking about? And how much room do you think you still have with the rating agencies to avoid getting put on a negative watch? A: Brian J. West - The Boeing Company - Executive VP of Finance & CFO: Thanks, Seth. First and foremost, I remind everyone that we do have $17 billion of liquidity today, comprised of the cash on hand as well as our credit lines. What we're focused on is a first half cash usage that is resulting from all of the actions we're taking to stabilize both the factory and the supply chain to set ourselves up for success as we move to the second half and into 2025. And to that end, any supplemental funding that I talked about would do two things. First of all, it would restore our cash balance to the historical level that you point out, that $10 billion-ish. But it also means that we want to continue our practice to stay well ahead of our near-term maturities. And by near term, I mean roughly the next 12 months. So that's what we're thinking about as we sit here today. We will be prudent and thoughtful. We believe the market would be open to us. And as we've said consistently, the most important thing is our investment-grade credit rating that we think a lot about, and it is a priority.
Q: Can we talk about the 737 rate again? How much of that is self-inflicted versus the FAA processes that are in place? And when we think about the 90-day time line that comes to a head with the IAM negotiations over the summertime, I would assume. So how do
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
