For
Boeing
stock to work, the company needs to deliver more planes in 2023 than it did in 2022. For deliveries to rise, supply chain wrinkles need to iron themselves out and production rates need to ramp higher.
The good new for investors is all that seems to be happening.
Thursday afternoon, Reuters reported that
Boeing
‘s CEO of commercial airplanes Stan Deal said that the 737 MAX production rate would go higher “soon.” Boeing didn’t immediately return a request for comment.
Boeing (ticker: BA) shares jumped roughly $4 on the comment. Shares finished up $3.07, or 1.5%, at $211.04 in Thursday trading. The
S&P 500
and
Dow Jones Industrial Average
rose 0.6% and 0.4%, respectively.
Boeing has been making MAX jets at a rate of about 31 a month for several months. The company plans to ramp that up to about 50 a month by 2025 or 2026. Engine supply, parts supply, Boeing’s own internal constraints and the overall economy are all factors limiting increases in production.
The company believes things are set to improve. It hopes to deliver about 400 to 450 MAX jets in 2023, up from 374 delivered in 2022. The implies an average rate of roughly 33 to 38 a month. That’s why Deal’s comments are a comforting sign to investors.
General Electric
(GE) and
Safran
(SAF. France), together in a joint venture, make the engines for the MAX. Deal’s comments are also a sign that engine supply should be improving. GE stock didn’t get a boost on Thursday though. Shares were flat on the day. GE stock, however, is up about 44% year to date.
Safran
shares were closed in overseas markets when Deal made his comments.
In 2022, Boeing delivered 480 jets, up from 340 delivered in 2021. Boeing delivered 806 jets in 2018, the year before any impact from the 737 MAX’s grounding or the Covid-19 pandemic.
Wall Street expects Boeing to deliver roughly 560 to 580 planes in 2023. Along with MAX jets Boeing should be delivering about 75 787 wide-body jets. The rest of the deliveries should be 777 and 767 model jets.
Boeing stock is up about 11% year to date and up about 8% over the past 12 months. Investors are encouraged by the potential for improvement. In coming quarters, production and delivery improvement will need to show up in financial results.
Wall Street projects almost $4 billion in free cash flow in 2023, up from about $2.3 billion generated in 2022. Before pandemic, Boeing was generating $10 billion to $15 billion in free cash flow annually. Wall Street expects Boeing to get back to $10-plus billion in annual free cash flow around 2024 or 2025.
Write to Al Root at allen.root@dowjones.com
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