UPDATE 7-Boeing shares sell off on slower-than-expected 737 production, weaker free cash flow outlook

​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 said it expects free cash flow to grow slower than analysts expected, reaching its $10 billion target in 2029, a year later than investors' consensus, 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 Bancroft, an investment analyst with Gabelli Funds investment group.

The market is going to punish any delay in increasing cash flow, he said. Boeing expects to generate $3 billion next year, lower than Wall Street's consensus projection of $5.5 billion due to lower deliveries and higher capital investment, Jefferies ‌analyst Sheila Kahyaoglu said in a research note on Tuesday.

The company 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, but it still expects to generate $2 billion by ‌the end of the year. Boeing reported an adjusted loss of 34 cents per share for the quarter through September, compared with an expected 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. To reach that rate, Boeing needs to be producing five jets a month at its new 737 production line in Everett, Washington, which opened in July, and increase fuselage production at the former Spirit AeroSystems plant in Wichita, Kansas. Boeing bought ⁠Spirit last year in part due to significant ongoing manufacturing defects.

Currently, Boeing is making fuselages at a lower rate while it uses up its existing inventory. Starting now, it has to increase output at Wichita to be in line with 737 output, Ortberg said. 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 a supplier dispute has stalled wing production for 777 freighters and 767s, which includes the KC-46 aerial refueling tanker, as first reported by Reuters on Friday.

Shipments for wing production have resumed, but ⁠the disruption ​will show up "over the next few quarters," Malave said. Boeing expects the 777-9 jetliner will be on track for regulator certification by mid-2027, with 10 to 15 deliveries 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: certification by US regulators of the 737 MAX 7 and MAX 10 and winning the US Navy's sixth-generation F/A-XX fighter contract.

"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 the 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 subsidiary HRL Laboratories 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.