Boeing Earnings: New CEO Has Lots Riding on Second Half of 2024

Key Morningstar Metrics for Boeing

• Fair Value Estimate: $221.00
• Morningstar Rating: 4 stars
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: High

What We Thought of Boeing’s Earnings

Boeing BA released mixed second-quarter results. The crucial recovery of the commercial jet production line seems to be making some progress, albeit sporadic, and a lot is riding on the second half of 2024. Lower defense profits, increased debt, a lower cash balance, and a $1.5 billion placeholder for potential incremental 737 MAX fines and legal liabilities reduced our fair value estimate from $221 per share to $218.

We were disappointed to see another $600 million charge in the defense business for what are proving to be egregiously mispriced development contracts for programs like the new Air Force One, the Starliner commercial space vessel, and training aircraft for the US Air Force, even considering industrywide cost inflation and supply chain disruption, which also added $391 million in cost overruns to the KC-46A tanker program. On the bright side, Boeing’s services business delivered another solid quarter of profitable growth, mostly fueled by busy aircraft, and we slightly increased our mid-term estimates for profitability in that business.

Boeing appointed Kelly Ortberg as its new CEO, succeeding David Calhoun effective Aug. 8. We think Ortberg is a good pick, as his experience leading Rockwell Collins before and during its integration into RTX offers the qualities we think Boeing most needs going forward from a leader: an appreciation for the aerospace engineering and manufacturing process, plus the ability to incentivize and foster continuous problem solving and collaboration on the shop floor. The real test will be navigating the very long cycle and high investment cost for new plane designs, which can be tricky because the potential rewards accrue over decades, not years.

Month-by-month increases in the number of planes both rolling off the commercial jet assembly line and being delivered from inventory lead us to believe Boeing can meet our revised 2024 forecast of 448 deliveries.