Boeing

Boeing Commercial Airplanes builds the 737, 767, 777 and 787; Defense, Space & Security builds military aircraft, satellites and weapons; Global Services supports both fleets with parts and maintenance, its most profitable unit. With Airbus it shares a duopoly in large passenger jets, so demand is not the problem: production is.

Boeing delivered 161 aircraft in the third quarter, including 124 737s, and free cash flow was $464 million after about $0.7 billion of Justice Department settlement payments. The core loss of $0.34 a share was wider than the $0.24 analysts expected, and revenue of $24.2 billion was slightly below estimates. Commercial Airplanes lost 6.5% on sales as supply-chain and rate-change costs rose; defense earned 6.2%, helped by a $252 million gain on selling HRL Laboratories, and services 18.3%. The backlog reached a record $745 billion, not yet counting the Navy’s F/A-XX fighter, and the 737-7 and 737-10 were certified.

The news was the timetable. Stabilising the 737 at 47 a month will run into 2027, with the step to 52 in the second half of 2027; the 787 move from 8 to 10 a month slipped to the end of 2026, so 787 deliveries will be at the low end of 90 to 100. Management narrowed 2026 free cash flow to about $2 billion and set about $3 billion for 2027 and $6 billion for 2028, with the $10 billion target now in 2029, about a year later than before. The 777X is still due for first delivery in 2027.

Boeing lost money every year from 2019 to 2024. The 2025 profit includes the gain on selling its Jeppesen navigation business, so the turnaround shows up more clearly in cash flow than in earnings.

Debt was $45.9 billion against $20.7 billion of cash and investments at the end of September, with $10 billion of undrawn credit lines; debt is down from over $50 billion. Shareholders’ equity only recently turned positive after years of losses. The 2024 equity raise and asset sales were used to protect the investment-grade rating.

Boeing’s profits are still distorted by the recovery, so the model works from a free cash flow path. This update moves that path a year later, in line with the new outlook; the lower share price also lowers the discount rate slightly, because debt is now a larger share of the company’s value, which offsets most of the delay.

Weighted 25/50/25: $197.

The price implies free cash flow of roughly $10 billion a year by 2030, about 15% below the base case at every step, or about what Boeing now targets for 2029 with no growth after it. The market is pricing a recovery that arrives late and stops short of the pre-2019 level.

Upside: the F/A-XX contract entering the backlog, defense growth that management now expects in the mid-single digits or higher, and the 777X entering service in 2027.

Boeing’s backlog guarantees demand; the value depends on building planes at the planned rate and quality. The third quarter moved the $10 billion cash target from 2028 to 2029, and the price fell further than the model’s value.

What would change the value: The 737 holding 47 a month, the 787 reaching 10, 777X certification by mid-2027 and free cash flow against the $2 billion 2026 and $3 billion 2027 outlook are the inputs to watch.