Image source: Getty Images.
Boeing has a plan
After the Alaska Airlines debacle, the U.S. Federal Aviation Administration ordered Boeing to slow down production and ensure each plane was shipshape before delivery. Boeing was initially instructed to take its time and build no more than 38 of its 737 airliners per month, a limit later raised to 42 planes. The company is currently seeking permission to accelerate that rate to 47 planes per month, with plans to increase it to 52, and eventually 63, planes per month.
More planes produced should translate into more planes delivered — and more cash collected on delivery. Analysts polled by S&P Global Market Intelligence forecast Boeing to generate more than $2.3 billion in free cash flow this year, growing to $6.2 billion in 2027, $9.8 billion in 2028, $13 billion in 2029, and $15 billion in 2030.
Yes, you read that right. Boeing’s probably going to return to full-year positive FCF this year, grow that dramatically over the next five years, and even then still be growing free cash flow at a healthy 15% per year.
Assuming all goes as planned, Boeing is trading today at just 11 times its projected FCF five years from now.
What needs to happen next
What does Boeing need to do to make this happen? The good news here is that the issues that upset Boeing’s apple cart last time around — botched introduction of new products — aren’t ly to arise over the next five years, because Boeing doesn’t plan to introduce any completely new “clean sheet” models during this period.
New variants of the 737 are undergoing flight tests and certification, however, as is a larger 777-9 airliner, and those have the potential to cause problems. But so long as Boeing keeps a tight focus on quality control, it should have a smooth flight from barely positive free cash flow today to massively profitable $15 billion annual FCF in 2030.
Key to this effort will be taking control over the company’s Spirit Aerosystems subsidiary, its supplier of 737 fuselages — and the company responsible for building the specific 737 that blew out over Oregon in 2024 — and also turning that business profitable. As The Wall Street Journal reported last week, Boeing’s $4.7 billion repurchase of Spirit last year actually cost Boeing closer to $10.3 billion once debt and obligations to perform “money pit” contracts are factored in.
This obstacle isn’t insurmountable for a company that may soon make $15 billion a year in cash profit. More importantly, fixing Spirit’s quality issues is key to Boeing being allowed to increase production to reach that $15 billion goal — but it will be a near-term drag on financial results.
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NYSE: BA
Boeing
Premium Feature
Moneyball Superscore
46/100
Today’s Change
(0.83%) $1.74
Current Price
$212.25
Key Data Points
Market Cap
$168BMarket cap calculated using publicly traded s outstanding only. Does not include unlisted, private, or dual-class non-traded s. Implied market cap may vary.
Day’s Range
$208.80 – $212.26
52wk Range
$176.77 – $254.35
Volume
4.6M
Avg Vol
5.6M
Gross Margin
4.71%
What else Boeing needs to do
And Boeing’s to-do list doesn’t end there; it doesn’t end with the Commercial business.
As I pointed out last month, Boeing’s defense business is once again profitable, and recently booked a major $131.2 billion contract to upgrade global F-15 fighter jet fleets. Once a headwind for Boeing, the defense business could now become a second tailwind as positive profit margins begin to turn a growing revenue stream into a second source of profit.
For this to play out perfectly, Boeing needs to avoid the temptation to underbid competitors to win big Pentagon projects, such as the 2011 KC-X Tanker project, which is still racking up losses to this day. Boeing should also probably abandon its ill-fated Starliner spacecraft program, which still isn’t flying, and is looking increasingly obsolete as SpaceX works to make its Starship spacecraft operational.
So, what does Boeing need to do to ensure its turnaround sticks? Keep doing the things that make it money, and stop doing the things that lose it money. Ultimately, it’s as simple as that.
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About the Author
Rich Smith is a contributing Motley Fool defense and stock market analyst covering publicly traded and emerging companies in defense, space, aerospace, and other sectors. Prior to The Motley Fool, Rich practiced international corporate law for Clifford Chance in Russia, and for the Russian-Ukrainian Legal Group in Moscow, Kyiv, and Washington, D.C. He holds a bachelor’s degree in international relations from the College of William & Mary, a law degree from the University of Baltimore, and a language certification from the International Institute of Russian Language & Culture in Tver, Russian Federation. The Globe and Mail once featured him as “one of the best stock pickers since 2009.”
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