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Boeing rises on plan to reach $10b cash flow by mid-2020s

Boeing Co. shares jumped after Chief Executive Officer (CEO) Dave Calhoun said the planemaker could generate $10 billion in cash annually by mid-decade, once it turns around its operations after years of setbacks and miscues.

The company’s stock posted the largest gain in the 30-member Dow Jones Industrial Average as executives laid out plans to speed jetliner output and return annual sales to about $100 billion by 2025 or 2026. Boeing’s sales last reached that level in 2018.

The US planemaker is wooing investors and analysts with two days of tours and presentations in Seattle, Boeing’s first such gathering since 2016 as it recovers from one of the worst crises in its century-long history. The company had burned through more than $28 billion from 2019 through 2021 as it was buffeted by a global grounding of its 737 Max, the Covid-19 pandemic and supplier disruptions.

While Calhoun stressed the work under way to restore Boeing’s finances and reputation for quality, he stopped short of predicting exactly when the company expected to return to a normal operating cadence. The company will have positive free cash flow for 2022, he said.

“I feel like we’ve mitigated these existential moments that we’ve had to face,” Calhoun said in his opening remarks.

Boeing shares rise 4.5% after earlier increasing as much as 5.8%. The shares pared their gain after commercial-aircraft chief Stan Deal said Boeing only delivered 27 of its cash-cow 737 jetliners last month as its quality inspectors found and fixed a flaw in some of the narrowbody jet’s frames.

The planemaker expects to generate $3 billion to $5 billion in free cash flow next year as it delivers more of its 737 Max and 787 Dreamliner jets, Chief Financial Officer Brian West said. That’s less than the $5.3 billion than analysts had projected, according to estimates compiled by Bloomberg.

West also provided new details about the US planemaker’s fourth-quarter performance, as part of the first financial guidance that Boeing has shared since two fatal 737 Max crashes sent it spiralling into crisis in early 2019.

Boeing is on pace to generate $2.5 billion in free cash flow during the fourth quarter, and a range of $1.5 billion to $2 billion in 2022, West said. If so, that would mark the first annual positive cash flow for the manufacturer since 2018.

Analysts had expected the company’s free cash flow to surge from $775 million this year to $5.3 billion in 2023, according to estimates compiled by Bloomberg.

Boeing faces added pressure to build up its cash reserves with payments looming for its $57 billion debt load. With nearly $17 billion of cash in hand, the planemaker doesn’t see a need to raise equity, West said.

In a note published before the investor presentations, analyst Ron Epstein of Bank of America said he was looking for more than just financial guidance. He said Boeing needs to change its culture while tackling a daunting to-do list that includes tackling product development, addressing its internal reporting and coping with inflation in labour and raw materials — all while addressing its heavy debt load.

“Ultimately, what heavy lifting has been done to change the company to assure what happened before does not happen again?” Epstein wrote.

—Bloomberg

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