Boeing's Exceptional Start to 2023 Waves a Green Flag at Investors
Aerospace giant Boeing (NYSE: BA) has had its fair share of bad news over the last few years, but its latest deliveries report can't be construed in any other way but positively. It's the kind of news flow that can change the narrative around the stock and lead to significant rerating by a skeptical market. Here's what happened and why it matters.
I'll get to the numbers quickly, but it's important to note why a delivery ramp is crucial for the stock. It's not just a question of booking more revenue per se. The fact is that ramping production is a critical factor in generating margin expansion. In other words, more of the revenue turns into profit. This is because Boeing can reduce its unit cost of production as it delivers more planes. A production ramp is also critically important because it demonstrates that the company and its suppliers are slowly overcoming the supply chain issues that caused production shortfalls in 2022.
To illustrate this fact and the details of the fourth quarter, I've collated a table of quarterly deliveries (for its key programs) through 2022. In addition, I've included the assumptions management made for 2023 and 2025/2026 to meet its target of $10 billion in free cash flow (FCF) in the 2025/2026 time frame. As a reminder, Boeing wasn't approved to deliver its wide-body 787s by the Federal Aviation Administration in the first half of 2022.
Source Fool.com
