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Boeing's stock reverses lower after announcing a $19 billion capital raise
By: MarketWatch | October 28, 2024
The capital raise, which was more than expected, included a $14 billion public offering of common shares. Bondholders cheered the news.
Shares of Boeing Co. briefly bounced, then reversed back lower in early Monday trading, after the troubled aerospace giant announced a larger-than-expected $19 billion capital raise, through public offerings of common stock and depositary shares.
Included in the offerings are 90 million shares of common stock, which based on Friday's closing price of $155.01 would be valued at $13.95 billion.
The company is also offering $5 billion of depositary shares, each representing one-twentieth of a share in newly issued convertible preferred stock.
The stock (BA) initially bounced to be up as much as 1% after the capital raise was announced, then reversed back into the red, to slump 1.7% in recent premarket trading.
Before the announcement, Bloomberg reported Boeing was set to launch a capital raise of more than $15 billion as soon as Monday.
The company filed a shelf registration to issue up to $25 billion of securities earlier this month and was widely expected to tap capital markets sooner, rather than later.
The capital raise comes as Boeing has warned of larger-than-expected quarterly losses and layoffs as a labor strike has entered its second month, and concerns that a high debt load could lead to a downgrade of the company's credit rating to "junk" status.
All three ratings agencies currently have the credit at the lowest rung of investment grade, although executives have said they are committed to retaining investment-grade status. The company has more than $57 billion of outstanding debt. A cut to junk would raise interest costs and also cut the company off from a larger pool of investors, who are only permitted to own investment-grade paper.
On Friday, the Wall Street Journal reported that Boeing was considering selling its space business as another way to deal with its operational issues and to raise money.
Read: Boeing's CEO wants to make it 'great again.' Here's what's standing in the way.
The strike by its machinists has come at an inopportune time for Boeing, which is struggling to turn itself around after a series of production missteps. The company became the focus of multiple federal investigations after a door panel blew off a 737 MAX plane during an Alaska Airlines flight in January.
Last week, the company posted a $6 billion loss for the third quarter and said it had burned through another $2 billion of cash.
"It will take time to return Boeing to its former legacy, but with the right focus and culture, we can be an iconic company and aerospace leader once again," newly installed Chief Executive Kelly Ortberg said in prepared remarks.
Read more: Boeing reveals $6 billion quarterly loss ahead of key vote by striking machinists
It was Ortberg's first quarterly earnings report since taking the helm in August. The executive is the former head of Boeing's supplier Rockwell Collins, and oversaw that company's integration with the former United Technologies and RTX (RTX) until he retired in 2021.
Striking workers rejected the company's latest offer the day it reported earnings, extending the strike into a sixth week, as the Associated Press reported.
The offer rejected included pay raises of 35% over four years. The version that union members rejected when they voted to strike last month featured a 25% increase over four years.
The union, which initially demanded 40% pay boosts over three years, said the annual raises in the revised offer would total 39.8%, when compounded. Boeing has said that average annual pay for machinists is currently $75,608.
Boeing workers told Associated Press reporters that a sticking point was the company's refusal to restore a traditional pension plan that was frozen a decade ago.
Boeing said Monday it will also offer the underwriters of the offerings options to buy an additional 13.5 million common shares and $750 million of depositary shares to cover over-allotments. That could bring in an additional $2.84 billion for Boeing.
Boeing said it plans to use the proceeds from the offerings for general corporate purposes, which could include repayment of debt, working capital, capital expenditures and funding of its subsidiaries.
Bondholders appeared to welcome the news, and the inclusion in the use of proceeds of plans to repay debt. Spreads on the company's outstanding bonds were tighter by a few basis points, as the following charts from data solutions provider BondCliQ Inc. show. The green line highlights the spread movement on Monday.
There was net buying of the bonds early in the session.
The stock has tumbled 40.5% year to date through Friday while the S&P 500 index has gained 21.8%.
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2 weeks ago
Has Boeing’s Stock Priced In All The Bad News? Investors Take Note
By: Forbes | October 24, 2024
From the 737 MAX disaster to supply chain problems and increasing financial difficulties, Boeing has had an ideal storm of setbacks. For investors, however, the essential question is: has the stock already factored in all the negative news? Having been in markets for a long time, I have seen businesses go to rock bottom only to show a robust comeback, exceeding expectations.
The present problems of Boeing are not unlike those of Ford and General Motors during the financial crisis, when both companies were about to fail. While GM came out of bankruptcy with strategic leadership changes and government help, Ford turned around by concentrating on fuel-efficient automobiles and reorganizing its activities. For Boeing, the parallels are obvious: operational realignment, changing leadership, and a fresh emphasis on safety and efficiency might form the basis for a comparable comeback, therefore offering investors hope for a long-term rebirth.
The 737 MAX Crisis: Has The Worst Passed?
The 737 MAX grounding by Boeing was catastrophic, causing government investigations, financial losses, and major damage to reputation. But the worst could now be behind us after years of addressing safety issues and rebuilding confidence. Having lived through crises of this kind, I have seen businesses bounce back. Boeing has turned toward recovery. Investors should now wonder whether the market has completely priced in these troubles, therefore indicating a possible dramatic turnaround.
Boeing is improving its quality control and safety. By including machine learning to aggressively find safety hazards, it has strengthened its Safety Management System (SMS). Based on AS9100 criteria, Boeing has also revised over 250 Quality Management System (QMS) policies; meanwhile, since 2019, quality checks have risen by 20%. The corporation invested in labor training and has taken significant steps to improve its safety and quality management systems Boeing also has had leadership changes to give safety and quality enhancement top priority and is closely working with Spirit AeroSystems.
Apart from the 737 disaster, Boeing has been battling supply chain problems, labor conflicts, and manufacturing delays. The performance of the stock has suffered hugely from continuous delays with the 777X aircraft and labor strikes. As a seasoned investor, though, these operational difficulties are well known in the market and essentially discounted in Boeing's value. The company keeps improving in terms of labor problems and manufacturing streamlining, implying that the present disturbances could not pose as much risk for long-term investors as first thought.
Further, Boeing's financial difficulties have been a main result of stretched cash flow and higher debt. Recent indicators of an improved cash position and short-term liquidity management, however, point to Boeing's possible better posture than it was at crisis height. From an investment standpoint, although Boeing's financial situation is still precarious, these developments suggest that some of the harshest headwinds could already be priced into the company, offering possible recovery when financial stability improves.
Financial Struggles: Headwinds But Room For Optimism
Continuous operational inefficiencies and significant debt building have been causing Boeing great financial strain. Cash flow has suffered greatly as a result, although new data show a better financial situation with better cash cushion and more liquidity management. These indicators of stabilization imply that the most severe financial headwinds may now be behind the organization, even if its financial situation remains difficult.
The Q3 2024 figures from Boeing point to resiliency and indications of recovery. Global Services saw income increase 2% to $4.9 billion thanks to increased commercial traffic and a healthy operating margin of 17%. Among the $8 billion in orders Boeing Defense received were a noteworthy $2.6 billion contract with the U.S. Air Force. The business also noted a sizable $511 billion backlog, indicating strong demand. Boeing's liquidity is still good with cash of $10.5 billion and recently acquired credit facilities. Moreover, the delivery of 92 737 model units shows development in its commercial section.
Cultural Transformation And Investor Confidence
Under its new leadership, Boeing is significantly changing its culture as part of its comeback. After years of giving fast development priority over safety and openness, Boeing is now turning its attention to values that foster confidence with regulators and consumers. Stabilizing long-term performance and raising internal morale depend on this shift. Since companies with strong internal values typically outperform those with divided corporate cultures and disconnected leadership, investors should view this cultural transformation as a potential catalyst for future recovery.
Although investor confidence in Boeing has suffered greatly over recent years, there is a chance for sentiment change because much of the negative news may be baked into the stock. Long-term investors may discover great value in Boeing at its present price levels as it keeps stabilizing its operations and rebuilding its reputation. Usually, investor mood lags operational recovery; so, constant improvement in leadership, openness, and execution helps to progressively restore market trust. Early indicators of a turn-around could be looking for good analyst changes or insider buying.
Is Now the Time to Buy Boeing Stock?
Although Boeing’s path has been uneven, there are encouraging indications that the worst of its difficulties might have passed by. Long-term investors may find an opportunity for upside even if most of the unfavorable news could be considered as influencing the stock price. Should Boeing keep enhancing its operations, carry out its cultural transformation with success, and strengthen its financial situation, the stock may show significant expansion possibilities. Boeing's present value is a good starting place for individuals with a long-term investing view, particularly as cultural changes and operational recovery advance. Watch Boeing's developments; they will be vital for its future success.
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2 weeks ago
Boeing Stock Slips as Worker Strike Continues
By: Schaeffer's Investment Research | October 24, 2024
• Union workers rejected Boeing's latest contract proposal
• The airline manufacturer posted significant third-quarter losses yesterday
Shares of Boeing Co (NYSE:BA) are down 2.4% at $153.28 at last glance, amid news that the International Association of Machinists and Aerospace Workers' (IMA) will extend its prolonged strike. Union workers rejected Boeing's latest contract proposal with 64% of the voters, a major setback for the airline manufacturer, which reported third-quarter losses of $6 billion in yesterday's report.
Over in BA's options pits today, calls are winning out on an absolute basis, with 47,000 exchanged so far. However, the 39,000 puts across the tape represents double the volume typically seen at this point in the day. The weekly 10/25 150-strike put is the most popular contract.
Options don't look like a bad way to go when weighing in on Boeing stock. It's Schaeffer's Volatility Scorecard (SVS) of 95 out of 100 means its tended to exceed options traders' volatility expectations in the past year.
On the charts, BA was just rejected by firm pressure at its 60-day moving average that has been in place since early August -- now tumbling back toward its Oct. 14 nearly two-year low of $146.02. Since the start of 2024, the equity is down 41.2%.
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2 weeks ago
Boeing Q3 Earnings: Revenue And Profit Decline, Cultural Challenges, CEO Ortberg Vows Transformation
By: Benzinga | October 23, 2024
Boeing Co BA reported a 1% year-over-year revenue decline to $17.854 billion in the third quarter of 2024, missing the consensus of $17.931 billion.
Adjusted loss per share expanded to $10.44 from $3.62 in the same quarter of 2023, missing the consensus of $10.34.
The company stated that the results reflect the impact of the International Association of Machinists and Aerospace Workers (IAM) work stoppage and previously announced charges on commercial and defense programs.
Boeing recorded an adjusted operating loss of $5.989 billion for the quarter, compared to $1.09 billion a year ago. The core operating loss margin was (33.6%) Vs. (6%) a year ago.
Commercial Airplanes revenue fell 5% YoY to $7.443 billion, impacted by $3 billion in charges and higher expenses.
Deliveries declined by 10%; 116 airplanes were delivered, and the backlog included over 5,400 airplanes valued at $428 billion.
Defense, Space & Security revenue rose 1% year over year to $5.536 billion. The backlog was $62 billion, of which 28% represents orders from customers outside the U.S.
Global Services revenue grew by 2% YoY to $4.910 billion. The operating margin expanded 70 bps to 17%, reflecting higher commercial volume and mix.
Operating cash outflow for the third quarter totaled $1.35 billion, compared to cash provided of $22 million YoY; free cash outflow was $1.96 billion.
Debt was $57.7 billion, down from $57.9 billion at the beginning of the quarter. At the end of the quarter, cash and investments in marketable securities totaled $10.5 billion, and the total company backlog was $511 billion.
Boeing 787 program is currently producing at 4 per month and maintains plans to return to 5 per month by year end. There were no 747 deliveries in 2024.
"It will take time to return Boeing to its former legacy, but with the right focus and culture, we can be an iconic company and aerospace leader once again," commented Kelly Ortberg, Boeing President and Chief Executive Officer.
"Going forward, we will be focused on fundamentally changing the culture, stabilizing the business, and improving program execution, while setting the foundation for the future of Boeing," added Ortberg.
Ortberg acknowledged that the company is facing significant challenges, citing eroded trust, excessive debt, and performance lapses that have disappointed many customers.
Price Action: At the last check on Wednesday, BA shares were trading lower by 1.02% at $158.25 premarket.
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3 weeks ago
Boeing, Union Reach Wage Deal to End Strike
By: WSJ | October 19, 2024
Boeing and the leaders of its machinists union have reached a tentative deal that could end a damaging strike that has halted most of its production.
The company is offering a 35% wage increase over four years in its latest proposal. That is up from its original offer of 25% that was overwhelmingly rejected by a union local representing machinists in the Pacific Northwest that build most of Boeing's jets.
The strike, which began on Sept. 13, has halted production of most of the company's airplanes and triggered a large round of layoffs.
The union announced the deal Saturday morning, saying, "it warrants presenting to the members and is worthy of your consideration."
The union plans to vote on the deal on Wednesday. Nearly 95% of workers voted to reject the last tentative deal, which the union's leaders recommended.
Boeing's business has been hobbled by the strike, with the company losing an estimated $1 billion a month. CEO Kelly Ortberg announced plans to cut 17,000 jobs and sell up to $25 billion in stock or debt to plug a cash drain. The company has warned of a $6 billion quarterly loss.
Ortberg has been trying to avert a prolonged shutdown that would not only drain Boeing's finances but also squeeze key suppliers and result in supplier cutbacks that would slow the company's ability to resume production levels.
The factories have been idle for more than a month, which has started to ripple through Boeing's sprawling network of suppliers. On Friday, Spirit AeroSystems said it would furlough 700 workers. Boeing has agreed to buy Spirit, a troubled supplier of fuselages.
The union's 33,000 members assemble the company's bestselling 737 jets in factories in the Seattle area. Their wages, which average about $75,000, haven't kept up with the cost of living in the area.
Boeing employee Garrett Dress, 20, hired last July, said he opposed the original deal because workers needed a bigger pay bump to maintain a basic quality of life in the expensive Pacific Northwest.
"Where we're coming up short with the contract, I know that people need that more than ever," he said recently as he walked a picket line outside Boeing's 737 factory in Renton, Wash.
The latest offer doesn't restore pensions, which was a key demand of many members, but something union leaders had said might be out of reach. Boeing would increase company 401(k) contributions, including a one-time payment of $5,000 to all workers' retirement accounts.
The company also would keep paying annual bonuses, which would have been eliminated as part of the initial offer, and pay $7,000 ratification bonuses. Another union win: Boeing agreed to drop a provision that would have cracked down on employees' calling in to work, which was a big sticking point for many workers.
More than 50% of members would have to vote to approve the new proposal. Restarting the idled production lines could take weeks from when machinists return to work.
The company said it looks forward to Wednesday's vote. The two sides reached the agreement after Acting Labor Secretary Julie Su intervened this week.
Before the strike, Boeing's output was well below its goals as the company slowed its factories to address quality issues that surfaced in the wake of a door-plug panel falling off a 737 MAX midflight. It has also struggled to hire and train enough workers after the pandemic.
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3 weeks ago
Boeing Stock Is Rising. More Cash Means a Stronger Balance Sheet
By: Barron's | October 15, 2024
Boeing is raising money to heal its ailing balance sheet.
Repair will likely include a stock sale that dilutes investors' existing equity stakes. At this point, investors are likely fine with that.
Tuesday, Boeing filed plans with the Securities and Exchange Commission to raise up to $25 billion in cash through common stock, preferred stock, and debt sales.
The mix of securities offered isn't specified, and no new securities are being offered yet. The filing prepares for future offerings and this is the first shelf registration for Boeing since 2020. Still, Wall Street believes a $10 billion stock offering is likely sooner than later.
Along with an additional cash cushion, more equity will help preserve Boeing's investment-grade credit rating, something Boeing management has said repeatedly it is keen to defend.
Investors know a stock sale is likely. They don't appear shocked. Shares of the commercial aircraft maker were up 0.8% in premarket trading at $150.15 apiece, while S&P 500 and Dow Jones Industrial Average futures were close to flat.
Analysts estimate Boeing is using about $1.5 billion a month during its current labor strike. The company ended the third quarter with roughly $20 billion in total liquidity. It added another $10 billion in a new credit agreement, disclosed Tuesday.
"These are two prudent steps to support the company's access to liquidity," Boeing said in an emailed statement, adding that it has not drawn on an existing revolving credit facility.
The bigger issue than current liquidity, and even the strike, is Boeing's total debt level. It ended the second quarter with about $53 billion in long-term debt. Some $40 billion of that was accumulated following two tragic 737 MAX crashes in 2018 and 2019 and the Covid-19 pandemic.
Too much debt can become a competitive issue. Boeing rival Airbus ended the second quarter with about $10 billion in long-term debt. Boeing needs to get its debt levels under control so it can divert more cash to investment spending on new planes needed to compete with Airbus.
The shelf registration followed Boeing's Friday announcement that it would l ay off some 17,000 workers. While layoffs, the strike, and new capital are all, essentially, happening now, the layoffs and capital would be happening regardless of Boeing's labor situation.
Both things are steps being taken by new CEO Kelly Ortberg to turn around the company.
Coming into Tuesday trading, Boeing stock was down about 43% year to date. Shares were down about 40% since an emergency-door plug blew out of a 737 MAX 9 jet on Jan. 5 while it was in flight. That incident has led to slower production and more regulatory oversight.
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4 weeks ago
Boeing Reports Preliminary Third Quarter Results
By: NewsWires | October 11, 2024
Boeing Reports Preliminary Third Quarter Results
Results impacted by the International Association of Machinists and Aerospace Workers (IAM) work stoppage and charges in the commercial airplanes and defense segments
PR Newswire
ARLINGTON, Va., Oct. 11, 2024
ARLINGTON, Va., Oct. 11, 2024 /PRNewswire/ — The Boeing Company [NYSE: BA] announced today it will recognize impacts to its financial results related to charges for certain programs across the Commercial Airplanes and Defense, Space & Security segments and the IAM work stoppage when it reports third quarter results on October 23. The company expects to report third quarter revenue of $17.8 billion, GAAP loss per share of ($9.97), and operating cash flow of ($1.3) billion. Cash and investments in marketable securities totaled $10.5 billion at the end of the quarter.
"While our business is facing near-term challenges, we are making important strategic decisions for our future and have a clear view on the work we must do to restore our company," said Kelly Ortberg, Boeing president and chief executive officer. "These decisive actions, along with key structural changes to our business, are necessary to remain competitive over the long term. We are also focusing on areas that are critical to our future and will ensure we have the balance sheet necessary to invest, support our people and deliver for our customers."
Commercial Airplanes expects to recognize pre-tax earnings charges of $3.0 billion on the 777X and 767 programs. The company now anticipates first delivery of the 777-9 in 2026 and the 777-8 freighter in 2028, resulting in a pre-tax earnings charge of $2.6 billion. This schedule and resulting financial impact are based on an updated assessment of the certification timelines to address the delays in flight testing of the 777-9, as well as anticipated delays associated with the IAM work stoppage. Commercial Airplanes also plans to conclude production of the 767 freighter and recognize a $0.4 billion pre-tax charge on the program, which also reflects impacts from the IAM work stoppage. Beginning in 2027, the company will solely produce 767-2C aircraft in support of the KC-46A Tanker program. Commercial Airplanes expects to report third quarter revenue of $7.4 billion and operating margin of (54.0) percent.
Defense, Space & Security expects to recognize pre-tax earnings charges of $2.0 billion on the T-7A, KC-46A, Commercial Crew, and MQ-25 programs. The T-7A program pre-tax charge of $0.9 billion was driven by higher estimated costs on production contracts in 2026 and beyond. The KC-46A program pre-tax charge of $0.7 billion reflects the decision to conclude production on the 767 freighter and impacts of the IAM work stoppage. Results also include unfavorable performance on other programs. Defense, Space & Security expects to report third quarter revenue $5.5 billion and operating margin of (43.1) percent.
Caution Concerning Forward-Looking Statements
The preliminary estimated financial results for the quarter ended September 30, 2024 included in this press release are preliminary, unaudited and subject to completion, and may change as a result of management's continued review. Such preliminary results are subject to the finalization of quarter-end financial and accounting procedures. The preliminary financial results represent management estimates that constitute forward-looking statements subject to risks and uncertainties. As a result, the preliminary financial results may materially differ from the actual results when they are completed and publicly disclosed. This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "may," "should," "expects," "intends," "projects," "plans," "believes," "estimates," "targets," "anticipates," and other similar words or expressions, or the negative thereof, generally can be used to help identify these forward-looking statements. Examples of forward-looking statements include statements relating to our future financial condition and operating results, as well as any other statement that does not directly relate to any historical or current fact. Forward-looking statements are based on expectations and assumptions that we believe to be reasonable when made, but that may not prove to be accurate.
Forward-looking statements are not guarantees and are subject to risks, uncertainties, and changes in circumstances that are difficult to predict. Many factors could cause actual results to differ materially and adversely from these forward-looking statements. Among these factors are risks related to: (1) general conditions in the economy and our industry, including those due to regulatory changes; (2) our reliance on our commercial airline customers; (3) the overall health of our aircraft production system, production quality issues, commercial airplane production rates, our ability to successfully develop and certify new aircraft or new derivative aircraft, and the ability of our aircraft to meet stringent performance and reliability standards; (4) our pending acquisition of Spirit AeroSystems Holdings, Inc. (Spirit), including the satisfaction of closing conditions in the expected timeframe or at all, (5) changing budget and appropriation levels and acquisition priorities of the U.S. government, as well as significant delays in U.S. government appropriations; (6) our dependence on our subcontractors and suppliers, as well as the availability of highly skilled labor and raw materials; (7) work stoppages or other labor disruptions; (8) competition within our markets; (9) our non-U.S. operations and sales to non-U.S. customers; (10) changes in accounting estimates; (11) realizing the anticipated benefits of mergers, acquisitions, joint ventures/strategic alliances or divestitures, including anticipated synergies and quality improvements related to our pending acquisition of Spirit; (12) our dependence on U.S. government contracts; (13) our reliance on fixed-price contracts; (14) our reliance on cost-type contracts; (15) contracts that include in-orbit incentive payments; (16) unauthorized access to our, our customers' and/or our suppliers' information and systems; (17) potential business disruptions, including threats to physical security or our information technology systems, extreme weather (including effects of climate change) or other acts of nature, and pandemics or other public health crises; (18) potential adverse developments in new or pending litigation and/or government inquiries or investigations; (19) potential environmental liabilities; (20) effects of climate change and legal, regulatory or market responses to such change; (21) credit rating agency actions and changes in our ability to obtain debt financing on commercially reasonable terms, at competitive rates and in sufficient amounts; (22) substantial pension and other postretirement benefit obligations; (23) the adequacy of our insurance coverage; and (24) customer and aircraft concentration in our customer financing portfolio.
Additional information concerning these and other factors can be found in our filings with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. Any forward-looking statement speaks only as of the date on which it is made, and we assume no obligation to update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise, except as required by law.
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