Boeing shares plunge on slower-than-expected 737 production, weaker free cash flow outlook

By Dan Catchpole and Shivansh Tiwary

SEATTLE, Oct 27 (Reuters) - Boeing CEO Kelly Ortberg said on Tuesday that the company will miss its 737 production and jet delivery targets this year, dealing a setback to its recovery and sending shares tumbling nearly 10%, their worst day in more than 18 months.

The company also pushed back its free cash flow growth outlook by a year. It now expects $3 billion next year, rather than the analyst consensus for $5.5 billion, according to LSEG data. 

While many aerospace companies are struggling to increase output, Boeing is recovering from years of crises and controversies that dented its reputation, drained cash and saddled it with a heavy debt load.

That may make investors more inclined to sell shares, even though Boeing's long-term outlook remains good due to high demand for jetliners and only one major competitor, Europe's Airbus, said Tony Gabelli, an investment analyst with Gabelli Funds investment group.

The market is going to punish any delay in increasing cash flow, he said. Boeing posted free cash flow of $464 million in the most recent quarter; for the year so far it has burned through $359 million in cash.

Boeing reported an adjusted loss of 34 cents per share for the quarter through September, compared with expectations for a loss of 21 cents, according to data compiled by LSEG.

Shares were down 9.6% to $170.23 in afternoon trading, which would be the stock's worst day since April 3, 2025.

PRODUCTION STRUGGLES

Boeing now expects to reach its 737 production rate target of 47 jets a month in early 2027. As recently as May, Boeing executives said they would hit that pace this summer.  

As a result, Boeing will not reach its 500-jet delivery target this year, the company's financial chief Jay Malave said during a conference call with analysts on Tuesday.

Wing production continues to be a major constraint, but Boeing still plans to increase to 52 jets a month in the second half of 2027, Ortberg said on the call. 

Deliveries of the popular single-aisle jetliner are a major driver of Boeing's cash flow, and before Ortberg joined Boeing in 2024, the company had struggled for years with production problems due to rushing rate increases at the expense of quality.

Despite pressure to increase 737 output faster, "we're going to be smart about this, stay disciplined, and the outlook is there," Ortberg said.

The company continues to struggle with production challenges in its 787 program and 777 freighters, as first reported by Reuters on Friday.

Boeing expects the 777-9 jetliner will be on track for regulator certification by mid-2027. It said it will continue to burn cash next year.  

LARGER-THAN-EXPECTED QUARTERLY LOSS

The dimmer outlook and a larger-than-expected quarterly loss overshadowed major wins by Boeing in recent months. 

During the quarter, Boeing secured certification for the 737 MAX 7 from US regulators, won the US Navy's sixth-generation F/A-XX fighter contract and generated free cash flow for another quarter, while certification of the larger MAX 10 followed in October.

"Expectations are rising, and they should. We have a stronger foundation than a year ago, but we also have more work to do to deliver on our backlog, strengthen our culture, and improve how we work every day," Ortberg said in a memo to employees after the results.

Revenue at Boeing's commercial airplanes division dipped slightly to $10.7 billion, while operating loss stood at $697 million for an operating margin of negative 6.5%, compared with negative-48.3% a year ago.

The company attributed the performance to less profitable jetliner deliveries and higher production costs, including from its supply chain.

At Boeing's defense division, higher deliveries, improved operational performance and a $252-million sale of a subsidiary contributed to nearly $500 million in quarterly earnings with an operating margin of 6.2%, up from 1.7% a year ago.

Boeing Global Services earned $1 billion and posted an operating margin of 18.3%. 

The US planemaker ended the quarter with $25.2 billion in net debt, down slightly from $25.9 billion at the close of the previous quarter and $30.4 billion a year ago. 

(Reporting by Dan Catchpole in Seattle and Shivansh Tiwary in Bengaluru; Editing by Lincoln Feast, Arun Koyyur, Nick Zieminski and David Gaffen)