Boeing delivered a surprise loss for the third quarter early Wednesday, with challenges in its defense unit offsetting commercial gains. Boeing stock plunged. GE stock popped.
The Dow Jones aerospace and defense giant also cut its Max delivery target again. But Boeing generated strong cash flow in Q3 and affirmed "a solid path" to positive free cash flow in 2022.
On Tuesday, Boeing jet-engine supplier General Electric signaled commercial aviation momentum. But GE lowered outlook after a Q3 earnings miss, tied to its struggling renewable energy business.
Both Boeing and GE continue to work on a turnaround. General Electric is looking to emerge as an aviation-focused company in early 2024, leaving its diversified past behind.
Recession fears and supply disruptions are rippling through industrial manufacturing chains.
Estimates: Wall Street saw Boeing swinging to EPS of 13 cents from a loss of 60 cents a year ago, snapping a string of four straight losses. Revenue was seen growing 18% to $18.014 billion. They predicted a return to free cash flow (FCF), of $1.077 billion.
Results: Boeing lost $6.18 per share. Revenue rose more than 4% to $15.956 billion. The Dow Jones aerospace and defense giant cited charges in its Air Force One and KC-46 air tanker projects. Boeing generated $2.906 billion in free cash flow vs. a cash burn of $507 million a year earlier.
Defense revenue fell 20%. Commercial revenue rose 40%.
FCF is a key metric of profitability and business performance. Healthy free cash flow allows a business to invest in growth, reduce debt, and pay dividends to shareholders.
Outlook: Boeing continues to expect positive free cash flow in 2022.
Ahead of the report, for the full year, Wall Street analysts projected a net loss of $1.85 per share and FCF of $595.5 million. Analysts expect annual Boeing earnings to return in 2023, after four years of losses.
Shares of Boeing initially gained more than 2% in Wednesday's stock market trading, then reversed 8.8% lower to 133.79. Boeing stock undercut its 50-day moving average as well as the 21-day average. It remains well below the 200-day line.
BA stock rallied for three consecutive weeks into Q3 earnings. While Boeing stock reclaimed the 50-day average Tuesday for the first time since Sept. 12, it remains well below the 200-day line.
In Q3, Boeing delivered 112 commercial airplanes, up 32% from 85 a year ago. Deliveries of its flagship 787 Dreamliner wide-body jet resumed in August, following a lengthy pause due to a series of manufacturing defects.
Alongside the 787 ramp, Boeing is trying to extend the deadline for certification of two new 737 Max variants. The 737 Max narrow-body jet was grounded worldwide after two fatal crashes in recent years, hitting Boeing earnings and stock.
On Wednesday, Alaska Airlines announced it will exercise options to add 52 Max jets to its fleet. But Boeing cut its full-year target for Max deliveries once again, now down to 375 from the low 400s. That's due to a shortage of jet engines, which is unlikely to ease until next year.
A worker shortage has delayed the production of jet engines and aircraft, while the recovery in commercial and business air travel has been gathering steam.
General Electric Earnings
Estimates: Analysts polled by FactSet expected a 17% EPS decrease to 47 cents on a 0.1% revenue drop to $18.404 billion. They predicted free cash flow (FCF) of $284.5 million, up from the prior quarter but down sharply from a year ago.
Results: GE earnings tumbled 39% to 35 cents a share, the company disclosed early Tuesday. Revenue grew 2.8% to $19.084 billion. Free cash flow came in at $1.189 billion, still down vs. a year earlier.
In Q3, revenue grew 24% in the aviation business and 6% in health care. But it fell 12% in power and 15% in renewable energy. Profits grew 52% in aviation and 1% in health care. It shrank 31% in power and renewables posted a loss.
GE tied the Q3 earnings miss mostly to a higher-than-expected charge for warranty and related reserves in the struggling renewables business.
Outlook: GE sees full-year EPS of $2.40-$2.80, down from $2.80-$3.50 prior. The company trimmed FCF guidance from $4.5-$5.5 billion to about $4.5 billion.
Wall Street was expecting GE earnings per share of $2.66 and FCF of $4.195 billion for the full year, after GE guided lower in late July.
Shares of General Electric rallied 3.4% to 75.46 on Wednesday. They fell 0.5% Tuesday. GE stock rallied for three straight weeks into Q3 earnings, retaking the 50-day moving average. GE stock is back above the 50-day moving average, but still below the 200-day line.
The Q3 aviation results are a big boost for GE, which is spinning off other businesses to focus on jet engines and aviation systems.
"Overall, strong market growth and business fundamentals reinforce GE's confidence in the significant long-term opportunity ahead for aerospace," the GE earnings release said.
It added that the spin-offs of the health unit in the first week of 2023 and of the power unit in early 2024, remain on track.
Besides Boeing, GE also supplies jet engines and aviation systems to Airbus and other firms.
Aviation performance was "fueled by the improving commercial backdrop and our progress managing operations and the supply chain," GEO CEO Larry Culp said in the GE earnings release Tuesday. In Q3, jet-engine deliveries increased double digits from the previous quarter.
Earlier in October, Delta Air Lines and United Airlines management also indicated that commercial air travel continues to recover after the Covid pandemic.