Boeing's Q1 Revenue Down 8% to $14 Billion; Dedicated Bulls Feel the Pain

The Boeing Co. (BA) announced on Wednesday its revenue in Q1 2022 dropped 8% to $14 billion, falling short of expectations of around $15.9 billion. Net loss stood at $1.2 billion, with a loss per share of $2.06, taking into account $212 million of pre-tax charges for impacts of the geopolitical escalations.

Core operating margin came in at negative 10.4%, representing a big drop down from the negative 2.3% reported last year. The company “burnt through” $3.56 billion more in cash. The losses and cash absorption stemmed from lower production, delays and of course, exceptionally high inflationary pressure. As a result, Boeing's balance sheet now carries $80 billion of inventories so the full effects will likely be felt down the road in the next quarters. It’s apparent now that Boeing is painfully losing competition to Airbus, where regulatory hurdles, supply disruptions and abnormally strong dollar – all factors further exacerbate the unfavorable situation.

During the quarter, the company launched the 777-8 Freighter assembly with an order from Qatar Airways. But delivery of the first 777-9 airplane is now expected only in 2025. To minimize idle inventory, the 777-9 production pace is being downwardly adjusted, including a temporary pause through 2023. This will result in approximately $1.5 billion of more costs and cash outlay beginning in Q2 2022 – all up until 777-9 production resumes. The 777 program is also leveraging the adjustment to the 777-9 production rate ramp to add 777 Freighter capacity starting in late 2023.

While during its conference call Boeing’s management reiterated the outlook to generate positive free cash flow for this year, the real picture remains as grim as ever before since the ill-fated crashes in Indonesia and Ethiopia. Boeing shares were down 7.53% following the earnings report on Wednesday.