Boeing (BA) reported preliminary fourth-quarter results on Thursday, revealing a significant financial setback of approximately $3.5 billion in operating cash flow losses, primarily caused by the effects of the IAM (International Association of Machinists) work stoppage, workforce reductions, and ongoing troubles in its defense business. The company also reported pre-tax charges of $1.7 billion linked to its defense and space business.
For the quarter, Boeing expects to post revenue of $15.2 billion, well below the consensus estimates of $16.76 billion as reported by Bloomberg. The company also projected a GAAP loss per share of $5.46, significantly worse than the $1.32 loss estimated by analysts.
As a result, Boeing’s (BA) shares dropped by 1% in after-hours trading following the announcement.
Boeing’s Struggles in Q4
Several factors contributed to Boeing’s (BA) struggles in Q4. The IAM strike, which concluded in November with a new four-year contract, led to higher labor costs and will impact the production of key aircraft like the 777X and 767. The strike cost the company $1.1 billion in pre-tax charges for these programs, further contributing to the company’s difficult financial quarter.
In addition to labor issues, Boeing also faced complications in its defense sector, with pre-tax charges of $1.7 billion attributed to troubled government programs. These challenges have been compounded by the company’s efforts to stabilize operations, including workforce reductions and management changes.
Despite these setbacks, Boeing (BA) took steps to improve its financial situation, with CEO Kelly Ortberg highlighting key actions taken to stabilize the business, including reaching an agreement with its IAM-represented teammates and conducting a successful capital raise to bolster its balance sheet. Furthermore, Boeing resumed production of its 737, 767, and 777/777X models, signaling that the company remains focused on recovery despite its current financial woes.
CWEB’s Analysis: Should You Buy or Sell Boeing (BA)?
Given Boeing’s significant challenges in Q4, CWEB analysts are urging investors to carefully consider their positions before deciding whether to buy or sell Boeing (BA). The company’s operating cash flow loss and the unexpected pre-tax charges underscore the pressures Boeing is facing from labor disputes, production delays, and government program difficulties.
While these challenges have negatively impacted the company’s financials, CWEB analysts also point out that Boeing (BA) has taken crucial steps to stabilize its operations. The company’s ability to resolve the labor strike, raise capital, and restart production on key aircraft models indicates that it is positioning itself for long-term recovery.
However, CWEB notes that the near-term outlook remains uncertain. The company’s higher labor costs and troubled defense programs may continue to weigh on its profitability in the coming quarters. Additionally, global economic conditions and the aviation industry’s recovery trajectory could present further challenges for Boeing.
Buy or Sell Boeing (BA)?
As Boeing (BA) navigates through its Q4 losses and a challenging operational environment, investors are left with a difficult decision. CWEB suggests that investors looking for short-term gains may want to proceed cautiously, as the company’s struggles are likely to persist in the near term. However, long-term investors who believe in Boeing’s ability to recover through its strategic actions and resumption of key aircraft production may consider holding or buying shares, especially if they believe in the company’s potential to rebound as the global aviation industry recovers.
Ultimately, whether you should buy or sell Boeing (BA) depends on your investment goals, risk tolerance, and belief in the company’s ability to overcome its current challenges. As CWEB suggests, close attention to Boeing’s next quarterly earnings and any further updates on its defense business and production ramp-up will be crucial in determining its future direction.
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