Planemaker Boeing swings to quarterly profit on sale, but unit losses disappoint

SEATTLE, Jan 27 (Reuters) – Boeing swung to a fourth-quarter profit on Tuesday, driven by the sale of its digital aviation services provider, as well as rising jet output and stronger deliveries.

Losses in its two biggest divisions were bigger than expected, however, and shares dropped. The company also recorded a $565 million charge on its KC-46 aerial-refueling tanker program due to higher estimated production support and supply chain costs.

The sale of Jeppesen for $10.6 billion covered operating losses in Boeing’s commercial and defense divisions. At the same time, the company continued to increase output of its two most popular jetliners – the 737 MAX and 787 – and posted positive free cash flow, a metric closely watched by investors.

737 MAX OUTPUT REACHES 42 A MONTH

Boeing ended the year with 737 MAX production of 42 airplanes per month and is in the process of raising the 787 rate to eight a month. The company plans to raise MAX production to 47 per month this year and 787 production to 10 a month.

The planemaker earned a net profit of $8.22 billion, or $10.23 per share, for the quarter through December, compared with a loss of $3.86 billion, or $5.46 per share, a year earlier.

On an adjusted basis, including the Jeppesen sale, Boeing earned a quarterly profit of 32 cents per share compared with expectations for a loss of 39 cents per share. Analysts had not expected Boeing’s results to include the sale.

Despite the production improvements, Boeing’s commercial airplane unit posted a quarterly loss of $632 million. Boeing’s defense and space unit lost $507 million. In a CNBC interview on Tuesday, Boeing CEO Kelly Ortberg said he expects the KC-46 charge to be a one-time event.

The company’s shares were down about 2.5% in early trading, likely due in part to higher-than-expected losses in the two units, Deutsche Bank analyst Scott Deuschle wrote in a note.

The quarterly results included the Jeppesen sale, which was part of Boeing’s services unit, to Thoma Bravo and the reacquisition of Spirit AeroSystems for $4.7 billion in stock. Boeing paid down Spirit’s debt by more than $3 billion, resulting in a net gain of about $7.6 billion.

Boeing’s services unit posted nearly $1 billion in profit after taking out the Jeppesen sale, Jefferies aerospace investment analyst Sheila Kahyaoglu wrote in a research note.

The company did not give financial projections for 2026. On a conference call with analysts, Chief Financial Officer Jay Malave said he expects $1 billion to $3 billion in positive free cash flow this year, depending on ongoing delays on the 777X program and the smallest 737 MAX variants – the 737-7 and 737-10.

Company executives have said their goal is $10 billion annually, but they have not provided a timeline.

MOST DELIVERIES SINCE 2018

Across all jet programs, the company delivered 600 airliners last year, the most since 2018. In the intervening years, Boeing was battered by the 737 MAX scandal, the pandemic, supply chain bottlenecks, a mid-air accident that exposed systemic quality and safety problems, and labor problems.

The company expects to increase jet deliveries this year.

“With progress comes expectations, and our customers and stakeholders are going to expect more from us this year,” Ortberg said in a memo to employees on Tuesday. “And we should expect more from each other.”

He said the company needs to make progress on fixed-cost defense and space programs that are behind schedule and have cost Boeing billions.

The company is “seeking to better manage (delivery) delay exposure in new contracts with tighter underwriting standards,” Malave said on the conference call.

The planemaker brought in $375 million in cash in the fourth quarter, but it still burned $1.9 billion in cash for the year, in part due to ongoing certification delays on the 737 MAX and 777X programs.

Boeing’s fourth-quarter revenue rose 57% to $23.95 billion compared with expectations of about $22.6 billion, according to data compiled by LSEG.

(Reporting by Nathan Gomes in Bengaluru and Dan Catchpole in Seattle; Editing by Anil D’Silva, Rod Nickel)