The aerospace giant faced a multitude of issues in the first half, and they’re not over yet.
Investors in Boeing (BA -0.87%) are enduring another challenging year. According to data from S&P Global Market Intelligence, the stock fell 30.3% in the first half. The decline looks justified, given the many issues the company faces.
What went wrong in 2024
Boeing operates out of three segments, and two of them are not performing as planned in 2024. The one that is, Boeing Global Services, is the smallest of the three, and it can’t blamed for the stock’s decline.
The major culprit is Boeing Commercial Airplanes, but before I get into that, a few words on the other underperformer — Boeing Defense, Space, & Security (BDS) — because it doesn’t get enough airtime.
It’s been a challenging period for defense companies, particularly those executing fixed-price development programs secured in less-cost inflationary times. Boeing’s execution has also been far from perfect on high-profile programs such as the KC-46 tanker, Air Force One, and the T-7 training jet.
These issues have helped put BDS’s margin into negative territory. In May, CFO Brian West told aerospace investors to expect the BDS margin to be negative in the second quarter, partly because of “fixed-price development programs showing a little bit of cost pressure.”
This comes after BDS told investors in October that “performance is below our expectations, and we acknowledge that we aren’t as far along in this recovery as we expected to be at this stage.”
Image source: Getty Images.
Boeing Commercial Airplanes
The company continues to face questions over its manufacturing quality, not least because of a high-profile incident involving a door blowout on an Alaska Airlines flight in January. The ongoing issues and the need to pause, rethink, and alter production, notably on the 737 airplane, meant that Boeing delivered just 137 Boeing 737 airplanes in the first half.
That’s a monthly rate of slightly less than 23 and a far cry from the 38-a-month rate management aimed to hit by the end of 2024. It’s also a long way from the 50-a-month rate management is aiming for in 2025/2026.
Image source: Getty Images.
Boeing cuts cash flow guidance
As a result of all these issues, West expects “the full year now to be a use versus generation of cash flow.” This comes after telling investors on the April earnings call to expect low-single-digit billions in free cash flow in 2024.
If you’re looking for one major reason the stock is down so big in 2024, you’ll find it right there in the cash flow guidance cut.
Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.