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    Boeing Co (BA)

    BA Q2 2025 FCF usage down to $200M, full-year $3B outlook affirmed

    Reported on Jul 29, 2025 (Before Market Open)
    Pre-Earnings Price$236.41Last close (Jul 28, 2025)
    Post-Earnings Price$239.50Open (Jul 29, 2025)
    Price Change
    $3.09(+1.31%)
    • Production Stabilization & Capacity Growth: Boeing delivered 150 commercial jets in Q2 2025 and achieved a production rate of 38 aircraft per month, with key performance indicators on track for a future rate increase to 42 per month once stability is demonstrated.
    • Improved Free Cash Flow & Operational Efficiency: The quarter recorded a significant improvement with free cash flow usage of only $200 million—a marked turnaround driven by higher delivery volumes and favorable timing—supporting expectations for a roughly $3 billion annual free cash flow outlook.
    • Robust Order Backlog & Strategic Contract Wins: The company’s strong demand is underlined by an extensive backlog—over $600 billion in orders—and major wins, including a $2.8 billion satellite contract, which reinforces the bullish long‑term revenue and market position.
    • Free Cash Flow Volatility: There is uncertainty in quarterly free cash flow performance due to timing issues and a potential $700 million DOJ-related onetime payment in Q3, which could undermine the year's overall free cash flow outlook around the $3 billion target.
    • Engineering Delays: The ongoing issues with the engine anti-icing design for the 737 family indicate that design solutions have not been finalized. This technical delay could push back certification and delivery timelines, affecting future revenue and cost control.
    • Production Ramp and Supply Chain Uncertainty: While current inventory levels support production, the planned incremental rate increases require achieving strict KPIs and could expose the company to supply chain bottlenecks as higher production volumes are reached, creating potential operational risks.
    MetricPeriodPrevious GuidanceCurrent GuidanceChange

    Free Cash Flow (annual)

    FY 2025

    $4–$5 billion usage

    $3 billion

    lowered

    737 Production Rate

    FY 2025

    38 per month

    38 per month; potential increase to 42 per month

    no change

    787 Production Rate

    FY 2025

    7 per month

    7 per month

    no change

    Free Cash Flow (Q3 2025)

    Q3 2025

    no prior guidance

    Approximately $200 million

    no prior guidance

    Free Cash Flow (Q4 2025)

    Q4 2025

    no prior guidance

    Positive

    no prior guidance

    737 MAX Deliveries (annual)

    FY 2025

    no prior guidance

    400+ deliveries

    no prior guidance

    787 Deliveries (annual)

    FY 2025

    no prior guidance

    70–80 deliveries

    no prior guidance

    Certification Timeline

    2026

    no prior guidance

    Expected in 2026

    no prior guidance

    BCA Margins (annual)

    FY 2025

    no prior guidance

    Expected to remain negative

    no prior guidance

    737 MAX Inventory Management

    Q3 2025

    no prior guidance

    Rework on pre-2023 airplanes to be completed in Q3 2025

    no prior guidance

    777X Inventory Management

    2026

    no prior guidance

    Expected to grow as entry into service approaches in 2026

    no prior guidance

    Defense, Space & Security Margins

    FY 2025

    no prior guidance

    Aiming for high single digits

    no prior guidance

    Long-Term Free Cash Flow Outlook

    Long-Term

    no prior guidance

    Target of $10 billion

    no prior guidance

    TopicPrevious MentionsCurrent PeriodTrend

    Production Stabilization and Ramp-Up

    Q3 2024: Delays from the IAM work stoppage with 737 and 787 targets mentioned ; Q4 2024: Plans for 737 at 38/month and eventual increase to 42/month, with careful KPI tracking ; Q1 2025: Conservative ramp‐up with production rates for 737 and 787 progressing steadily

    Q2 2025: Continued stabilization with the 737 production achieving 38/month and preparation for further increases, along with the 787 ramp-up to 7/month and active steps on the 777X program

    Consistent progress – The topic has been consistently discussed, with earlier delays now largely overcome and a clearer path toward higher production rates.

    Operational Efficiency and KPI Improvement

    Q3 2024: Indirect mentions via execution discipline and cultural change to enhance efficiency ; Q4 2024: Focus on training, rebalance of production lines and KPI monitoring ; Q1 2025: Notable improvements like 50% reduction in traveled work and rework reductions, with stable KPIs

    Q2 2025: Continued focus on improving operational efficiency through a 50% reduction in traveled work, structured training, and stable KPI trends in both the 737 and 787 programs, helping solidify production performance

    Incremental improvements – KPI stabilization and enhanced operational processes are gradually improving, reflecting a sustained focus from previous periods.

    Free Cash Flow Performance: Stability vs. Volatility

    Q3 2024: Noted volatility with free cash flow use of around $2B and expected working capital challenges ; Q4 2024: Heavy cash usage impacted by production and working capital factors, with expectations for improvement in 2025 ; Q1 2025: Volatility acknowledged with plans for a turnaround

    Q2 2025: Free cash flow usage reduced to $200 million with outlook for positive free cash flow in Q4, reflecting improved delivery mix and operational performance

    Transition from volatility to stabilization – While previous periods highlighted significant cash flow challenges, the current period signals a move toward a positive free cash flow trajectory later in the year.

    Supply Chain Constraints and Cost Pressures

    Q3 2024: Challenges related to the work stoppage and managing supplier shipments ; Q4 2024: Emphasis on supply chain readiness for ramp-up and no major constraints for 737 production ; Q1 2025: Elevated inventory and focused supplier collaboration noted

    Q2 2025: Continued proactive management of the supply chain with ample inventory buffering and mitigation of cost pressures—including managing tariffs impacting input costs by less than $500 million

    Stable with proactive measures – The topic remains consistently critical with slightly improved supply chain resilience and active cost management strategies compared to prior statements.

    Robust Order Backlog and Demand Resilience

    Q3 2024: Backlog around $0.5 trillion with 5,400+ airplanes, indicating strong demand ; Q4 2024: Backlog exceeds $0.5 trillion reflecting healthy market conditions ; Q1 2025: Backlog of $460 billion and robust global demand articulated

    Q2 2025: Order backlog increased to $522 billion (over 5,900 airplanes) with strong delivery figures and positive customer sentiment, underscoring continued market robustness

    Growing and resilient – Demand continues to be strong and the order backlog is expanding, reinforcing the company’s positive market positioning.

    Strategic Contract Wins and New Revenue Streams

    Q3 2024: Notable orders in Defense & Space (BDS) and Boeing Global Services (BGS) ; Q4 2024: Limited discussion with focus on recovery rather than new revenue ; Q1 2025: Strategic wins such as the F-47 program, MQ-25 progress, and key BGS milestones

    Q2 2025: New strategic wins including a $2.8 billion US Space Force contract, along with continued emphasis on defense programs and digital business divestiture plans, reinforcing diversification of revenue streams

    Emerging and expanding – While consistently important, recent wins and new contracts in Q2 2025 signal an emergence of additional high-value opportunities and revenue diversification.

    Engineering and Design Delays (engine anti-icing issues)

    Q4 2024: Engine anti-icing issues affecting 737-7 and 737-10 certification discussed with ongoing tests ; Q1 2025: Topic was not mentioned; Q3 2024: No specific reference to these delays

    Q2 2025: Engineering and design delays persist with unresolved engine anti-icing design issues for certain 737 MAX models, delaying certification to 2026

    Persistent challenge – The issue appears intermittently; while it was noted in Q4 2024 and again in Q2 2025, the topic remains a persistent technical hurdle despite overall production improvements.

    Tariff Impacts and China Delivery Uncertainty

    Q3 2024 and Q4 2024: No significant mention of tariff impacts or China delivery issues

    Q1 and Q2 2025: Detailed discussion on tariff impacts (estimated less than $500 million) and uncertainty regarding deliveries to China (with plans to remarket unsold aircraft, potential impact exceeding $1 billion)

    New and emerging – This topic is newly emphasized in Q1/Q2 2025, reflecting evolving geopolitical and trade uncertainties that were less prominent in earlier periods.

    Defense & Space Program Execution Challenges

    Q3 2024: Cited pretax charges ($2 billion) and execution challenges in fixed-price programs with a call for better risk management ; Q4 2024: Discussed cost pressures and significant charges on programs like KC-46A and T-7A ; Q1 2025: Acknowledged ongoing challenges with improved milestones

    Q2 2025: Continued challenges in fixed-price development programs with emphasis on risk retirement, leadership changes (appointment of a permanent BDS CEO), and refined contracting approaches to mitigate ongoing execution challenges

    Ongoing with improvements – Execution challenges persist but are being actively managed through enhanced risk management, leadership adjustments, and improved contract strategies.

    Capital Management and Balance Sheet Strategy

    Q3 2024: Focus on maintaining an investment‑grade rating and liquidity, with readiness for a capital raise ; Q4 2024: Highlighted significant capital raises, debt reduction, and portfolio reviews including potential divestitures (e.g., Jeppesen) ; Q1 2025: Detailed debt and liquidity status with divestiture plans

    Q2 2025: Continued strong capital management with routine debt pay-down, steady liquidity, and a focus on stabilizing the balance sheet while avoiding dilution, as previous divestiture strategies (e.g. digital aviation agreements) are well integrated

    Consistent and disciplined – The capital management strategy remains a core priority with steady debt reduction, liquidity measures, and careful divestiture actions to support long‑term stability without dilution concerns.

    Shutdown of Shadow Factories for Margin Improvement

    Q3 2024: Shutdown delayed by the IAM work stoppage affecting rework on pre‑2023 builds ; Q4 2024: Clear plans for shutting down the 787 shadow factory early in 2025 and transitioning 737 labor by mid‑2025 ; Q1 2025: Shutdown of shadow factories planned by mid‑year

    Q2 2025: Continued execution with plans to complete rework on pre‑2023 737 airplanes and shut down the shadow factory in the third quarter as part of broader margin improvement efforts

    Progressing on schedule – While earlier periods noted delays due to external disruptions, current actions indicate tangible progress towards shutting down costly shadow facilities to improve margins.

    Future Cash Flow Impact from 777X Program

    Q3 2024: Described as the most cash‑intensive phase with a $2.6 billion pre-tax charge; heavy inventory spends averaging $800 million per quarter and a cash profile mirroring past developments, with first delivery now expected in 2026 ; Q4 2024: Heavy cash usage expected in 2025 with improvement post‑EIS

    Q1 2025 & Q2 2025: Continued significant investment with increased inventory noted and acknowledgment of near‑term cash usage pressures, while anticipating a transition to positive cash flow after the 777X enters service in 2026

    Sustained near‑term burden with long‑term optimism – The program remains cash‑intensive in the near term, consistent with past remarks, but is forecast to yield improved cash flows post‑certification and entry into service in 2026.

    1. Free Cash Flow
      Q: How did free cash flow improve?
      A: Management noted Q2 free cash flow usage dropped to $200M from prior higher usage, largely driven by extra deliveries, making a full‐year net of about $3B a reasonable assumption despite near-term timing risks.

    2. Deliveries/Inventory
      Q: What were MAX delivery results and inventory trends?
      A: They reported strong production with 37 777 deliveries in H1 and steady inventory management, targeting the high end of the 70–80 MAX deliveries for the year.

    3. Tariff Impact
      Q: How are tariffs affecting orders?
      A: Reduced input tariffs from agreements—especially with Japan and the EU—are boosting customer order momentum while negotiations with Italy and avoidance of retaliatory tariffs remain monitored.

    4. Production Rate Framework
      Q: What’s the long-term rate guidance strategy?
      A: Management explained they are stabilizing current production before pursuing rate increases in increments of five per month every six months as part of a disciplined, KPI-based approach.

    5. Rate Increases
      Q: How confident are you on ramping production?
      A: They expressed confidence—bolstered by launching a fourth line in Everett and a buffer in supply chain inventory—while stressing that stability remains the first priority.

    6. Engine Deicing
      Q: Why is the engine anti-icing fix delayed?
      A: Additional design changes are needed to address delicate airflow issues at the engine inlet, delaying certification despite ongoing tests.

    7. Free Cash Target
      Q: Is the $10B free cash target still valid?
      A: Management affirmed that while the timing remains uncertain, the underlying demand and margin improvements support the long-term $10B framework.

    8. Next Gen Design
      Q: When will a new single-aisle design be decided?
      A: No decision date has been set as the launch depends on market readiness, technology maturity, and ongoing recovery progress.

    9. BDS Margins
      Q: What’s the outlook on BDS margins and strikes?
      A: They expect BDS margins to improve to high single digits, and strike risks are manageable given the relatively smaller workforce compared to previous episodes.

    10. Management Outlook
      Q: What surprised you and what’s next for 2026?
      A: Management was pleased with steady progress amid macro challenges, prioritizing quality, stability, and rebuilding trust as they prepare for further recovery in 2026.