Boeing Stock Climbs After Reporting an Earnings Loss. Here’s Why.

Boeing’s first-quarter results beat estimates, lifting the stock in premarket trading. Now investors will have to wait to hear what the embattled company will say on its earnings conference call.

The commercial aerospace giant on Wednesday reported a per-share loss of $1.13 from sales of $16.6 billion. Wall Street expected a per-share loss of $1.73 and sales of $16.3 billion, according to Bloomberg. Free cash flow at negative $3.9 billion also was better than expectations for negative $4.4 billion.

A year ago, Boeing reported a per-share loss of $1.27 from sales of $17.9 billion. Free cash flow was negative $800 million.

Shares were up 3.6% at $175.15 in premarket trading after results were released, while S&P 500 and Nasdaq Composite futures were rising 0.2% and 0.7%, respectively.

Sales in the commercial airplane business were $4.7 billion, down from $6.7 billion a year earlier. Boeing delivered 83 planes in the first quarter, down from 130 a year ago. The first-quarter operating loss was $1.1 billion, wider than a year-ago loss of $615 million.

Operating profit turned positive in the defense business though, coming in at $151 million, a $363 million improvement from the $212 million first-quarter loss a year ago.

With numbers in, investors’ attention turns to the 10:30 a.m. Eastern time conference call. There is a lot to discuss.

The most obvious topic is production quality. Coming into Wednesday trading, Boeing stock had lost more than 30% since an emergency door plug blew off a 737 MAX 9 jet operated by Alaska Air on Jan. 5. The incident resulted in slower production, millions paid in compensation to airline customers, and more oversight by the Federal Aviation Administration.

There also is the issue of management succession. In March, current CEO Dave Calhoun announced he would step down at the end of the year, without naming a successor.

Jefferies analyst Sheila Kahyaoglu recently wrote about what she would do as a new Boeing CEO. One thing, she said, is to walk away from Boeing’s $10 billion annual free cash flow target by 2026. It creates unnecessary expectations, she wrote in an April 21 note: “External pressures from the financial community (including ourselves) are not helpful when safety is paramount.”

She also would commit to a new medium-size single-aisle aircraft—one likely a little larger than the current 737 MAX. A new plane is something Calhoun hasn’t committed to doing since taking over in early 2020.

Beyond the 737 MAX, 787 Dreamliner production rates are slowing amid supply-chain problems. The production quality of Boeing’s popular twin-aisle jet is also in focus after a whistle-blower said in testimony to Congress that he had witnessed questionable manufacturing practices. Boeing defended the plane’s safety record and said it takes anything affecting safety seriously.

The company is facing many serious issues. Still, an earnings beat is welcome. Coming into the first-quarter print, Boeing had missed earnings estimates 14 out of the past 19 quarters, dating back to the second quarter of 2019, just after the 737 MAX was grounded worldwide following two deadly crashes within five months.

The median miss versus Wall Street estimates was almost 200%. That happens when, for instance, Wall Street projects a 10-cent per share loss and the company reports a 30-cent loss.

Some Boeing misses have been so large that the median is a better statistical measure than the average miss.

That level of earnings volatility is very high. Boeing peer Airbus has missed earnings 5 times out of the past 19 quarters. Its median miss was 8%. That’s like earning $1 a share when analysts projected $1.09.

Investors should brace for some stock volatility in regular trading on Wednesday. Options markets imply Boeing shares will move about 5%, up or down. Shares have moved an average of about 4%, up or down, following the past four quarterly reports. Shares have risen three times and fallen once over that span.

Write to Al Root at [email protected]