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Here’s what Boeing blames for its big loss

New York

Boeing reported an operating loss of $650 million in the fourth quarter, surprising Wall Street analysts who had expected the aerospace giant to turn a profit.

The company blamed the unexpected loss on “abnormal production costs” as it tried both to deliver the remaining backlog of 737 Max jets and to ramp up deliveries of 787 Dreamliners. The company’s 787 production remains below normal prices.

In addition, Boeing had to pay an unspecified compensation amount to 787 customers whose deliveries were delayed by about a year.

Boeing has reported just two profitable quarters in the nearly four years since the grounding of the 737 Max. After two fatal crashes that killed 346 people, the jet was grounded for 20 months starting in March 2019. Then, a year later, the pandemic brought demand for flying and new planes to a near halt — leading to the cancellation of hundreds of jet- orders and accumulating losses for Boeing.

Still, the industry has shown signs of picking up, and analysts surveyed by Refinitiv had predicted Boeing would earn 26 cents a share. Instead, it reported a loss of $1.75 per share. So while that’s an improvement from the $7.69 per share loss in the fourth quarter of 2021, it’s also a big disappointment.

Boeing’s problems in the fourth quarter are linked to the difficult years since the 737 Max crisis.

First, the company was saddled with excess inventory of hundreds of jets. Typically, Boeing does not hold inventory, as the planes are delivered to customers soon after completion.

But even though the 737 Max jets could not be delivered during the grounding, Boeing continued to build them — in part to keep suppliers in business. It was then forced to find new buyers for some of these aircraft due to customers canceling orders during the pandemic.

Beyond the Max, the FAA flagged quality issues with the company’s 787 Dreamliners that stopped it from delivering that model. While the Dreamliner wasn’t grounded like the Max, it still affected the company: Much of Boeing’s abnormal production costs last quarter were a result of having to rework both the Max and Dreamliner jets, CEO Dave Calhoun said in an interview on CNBC Wednesday.

Supply chain issues are getting better, Calhoun added, but they’re not behind the company or the aerospace industry as a whole. He hinted that more quarters of money losses could be ahead despite a slowdown in demand, and said he expects Boeing to have “bounced” margins throughout the year as Max and Dreamliner inventories are cleared.

Boeing delivered 152 commercial jets in the quarter, up 54% from a year ago and beating its own target.

But digging deeper into the financial results highlights a potential problem: Boeing appears to have received lower prices for some of its planes than analysts had expected.

That’s because the company’s revenue fell short of forecasts, coming in at just under $20 billion. While it was Boeing’s highest revenue number since the start of the pandemic, it was roughly $360 million short of analysts’ consensus estimates. The combination of better-than-expected deliveries, but worse-than-expected revenues, suggests weaker pricing.

Boeing tried to put the best possible spin on its disappointing results.

The company pointed out that this was the first full year of positive operating cash flow since the start of the 737 Max crisis. Boeing ultimately brought in $3.5 billion more cash than it used, and the company reaffirmed its 2023 guidance of positive operating cash flow of between $4.5 billion and $6.5 billion.

“Demand across our portfolio is strong and we remain focused on driving stability in our operations and in our supply chain to meet our commitments in 2023 and beyond,” Calhoun said in the company’s statement. “While challenges remain, we are well positioned and on track to restore our operational and financial strength.”

Shares of Boeing ( BA ) fell 2.5% in morning trading.

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