Production Woes Plague Earnings for Boeing, RTX, and Spirit Aero
Investors Question Financial Losses and Year-End Targets
After a series of production problems, investors are concerned about the financial losses and year-end targets for U.S. aerospace companies Boeing, RTX, and Spirit AeroSystems. These “problem children” are expected to report losses in their third-quarter results as they grapple with manufacturing defects on their most profitable aircraft and engine products.
Challenges Faced by Boeing, RTX, and Spirit
RTX engine subsidiary Pratt & Whitney recently disclosed a $3 billion charge in the quarter due to contaminated metal powder in their Geared Turbofan (GTF) engines. Meanwhile, Boeing and Spirit are dealing with misdrilled holes on Boeing’s 737 MAX, which has prompted expanded inspections. Analysts have referred to these companies as the sector’s “problem children.”
Projected Losses for RTX, Boeing, and Spirit
According to analysts’ forecasts, RTX is expected to report a loss of 74 cents per diluted share, compared to a profit of 94 cents last year. Boeing is projected to report a loss of $2.23 per diluted share, compared to a loss of $5.49 a year ago. Spirit is expected to report a loss of $1.03 per share, compared to a loss of $1.22 last year.
Continued Scrutiny for RTX
RTX, the first to release results, will face continued scrutiny about the GTF engine issue. Analysts are concerned that shop visits could take longer than expected, potentially affecting a higher volume of engines and triggering higher compensation to customers. This could result in staggered and prolonged cash recognition.
Focus on Boeing’s Cash-Flow Generation
Boeing investors will closely examine the company’s 2023 free cash-flow generation, which was projected to be between $3 billion and $5 billion. Meeting this target may be challenging if Boeing fails to deliver the planned 400 737s this year. Analysts believe it will be a struggle for Boeing to achieve its guidance, even at the low end.
Spirit’s Interim CEO Faces Challenges
Spirit, set to report on November 1st, has already revealed preliminary results as part of a new price agreement with Boeing. The earnings call will be a test for newly-appointed interim CEO Patrick Shanahan, who is known for fixing tough operational problems. Investors will be interested in learning how Shanahan plans to restore Spirit’s balance sheet and get aircraft production back on track.
Conclusion
These aerospace companies face significant challenges in resolving manufacturing defects and meeting financial targets. As investors wait for their third-quarter results, the focus will be on how they address these issues and navigate the path to recovery.
