Boeing postpones key division's earnings forecast. What about the stock?

The American aircraft maker Boeing has postponed its forecast for the commercial airplane division to turn a profit: if before the company expected it to happen in 2026, now - not earlier than 2027. The reason is production glitches and higher integration costs for Spirit AeroSystems, which Boeing reacquired last year. Investors didn't like the news that the transition to profitability would be delayed.

Boeing does not expect positive or at least zero margins from the civil aircraft division before 2027, Chief Financial Officer Jay Malave said. His words are reported by Bloomberg. The company has thus postponed for a year expectations for the commercial division to reach profit: earlier it hoped to achieve this goal in 2026, writes Reuters.

A key factor in the forecast revision was the purchase of components supplier Spirit AeroSystems: its financial performance was weaker than expected, Bloomberg reported. As Malave noted, you can't "access all the information until the deal is closed," so Boeing had to "revise the margins" of the division. At the same time, Boeing's CFO called it a "short-term headwind" (a negative factor).

The commercial airplane division's first-quarter operating margin will be about -8%, according to management statements cited by Bloomberg.

Additional pressure comes from production problems. Boeing is fixing wiring defects on about 25 Boeing 737 Max airplanes, about ten deliveries will be postponed to the second quarter, Bloomberg writes. At the same time, Malave said, in annualized terms, this should not affect deliveries. Boeing plans to ramp up production of the 737 Max from 42 to 47 airplanes a month by the end of the year and deliver about 500 airliners in 2026, Reuters reports. Those airplanes remain a key source of cash flow, the agency notes.

Boeing 787 Dreamliner deliveries in the first quarter will also come in below expectations - about 15 planes instead of 20 - due to delays in certification of premium seats, Reuters reported.

Shares of Boeing were declining after the comments of the management: at the moment the fall reached 3.2%, but then the securities partially recovered the decline at the end of trading on March 17 fell by 1.2%. Over the last month, the company's shares lost 13.6%.

The situation around Boeing is complicated by litigation, with a US federal court allowing the company's shareholders to file a class action lawsuit accusing the company of covering up safety problems with Boeing 737 Max planes before the 2018-2019 crashes that killed 346 people, Reuters reports. The shareholders allege Boeing accelerated the airplane's development, ignored employee warnings and misled regulators for fear of falling behind in competition with Airbus.

Earlier in 2021, Boeing agreed to pay more than $2.5 billion to settle a U.S. Justice Department criminal case related to the safety of the 737 MAX, Reuters recalls.

Additional pressure on the industry comes from the engine situation: as aviation analyst Robert Mann noted, "the latest generation of engines has been more problematic and less efficient than expected," putting strain on supply chains, Reuters writes.

Boeing has an average target price of $273.21 on the stock, suggesting a potential upside of 29.6% relative to the closing price on March 17.

23 of 30 analysts, according to Marketwatch, recommend buying Boeing shares (Buy and Overweight ratings). Six analysts recommend holding (Hold), one recommends selling (Sell).

This article was AI-translated and verified by a human editor