Boeing's Q3 Earnings Face Turbulence: Strikes, Layoffs, Safety Woes Ahead - Boeing (NYSE:BA)

Boeing Company (NYSE:BA) added large-scale layoffs to its list of troubles in 2024 as the company faces an ongoing strike of its unionized factory workers, government investigations, executive churn and mounting financial losses.

Boeing To Cut 17,000 Jobs: The aerospace giant announced Friday a 10% workforce reduction of approximately 17,000 jobs in an effort to stem financial losses related to production delays and its ongoing factory workers strike. Boeing CEO Kelly Ortberg said the layoffs would affect executives, managers and employees.

"We know these decisions will cause difficulty for you, your families and our team, and I sincerely wish we could avoid taking them. However, the state of our business and our future recovery require tough actions," Ortberg wrote in a message to employees.

According to a Reuters report, Boeing planned a series of internal meetings this week to flesh out its workforce reduction plan. The reductions may include involuntary cuts in order to better manage costs and impacts, industry sources said.

Ongoing Boeing Strike: Approximately 33,000 Boeing factory workers remain on strike after aircraft assembly workers rejected a new contract offer and walked off the job on Sept. 13. Jefferies aerospace analyst Sheila Kahyaoglu estimated a 30-day strike would cost the struggling aerospace giant $1.5 billion, and the strike has now passed the 30-day mark.

Last week, S&P Global Ratings placed Boeing’s "BBB" issuer credit rating and senior unsecured debt ratings on CreditWatch with negative implications. The rating agency pointed to the ongoing strike which could cost the company about $10 billion in 2024 if it continues through the fourth quarter.

Boeing’s Safety Concerns: Boeing began 2024 with a critical safety incident when a 737 MAX door plug blew out midair, injuring several passengers and forcing an emergency landing of the aircraft. The incident led to the grounding of Boeing’s 737 fleet and increased oversight of the company. A National Transportation Safety Board (NTSB) investigation and Federal Aviation Administration (FAA) audit also found multiple instances of non-compliance with Boeing’s manufacturing process control, parts handling and storage and product control.

In July, the U.S. Department of Justice (DOJ) and Boeing finalized a plea agreement in a case related to two fatal MAX plane crashes in 2018 and 2019. Boeing pleaded guilty to conspiracy to defraud the U.S. and was fined $243.6 million. Boeing is also serving a three-year term of organizational probation and investing $455 million in compliance, quality and safety programs.

Earlier this month, Sens. Elizabeth Warren of Massachusetts and Richard Blumenthal of Connecticut sent a letter to Attorney General Merrick Garland pressing the DOJ to criminally prosecute Boeing executives for not doing enough to ensure passenger safety.

Most recently, the FAA issued an alert last Monday for operators of Boeing 737 airplanes that the rudder system could jam due to a faulty part supplied by Rtx Corp. (NYSE:RTX).

Boeing Q3 Preview: On Friday, Boeing said it will recognize impacts to its third-quarter financial results related to charges for programs across its Commercial Airplanes and Defense, Space & Security segments and the ongoing assembly workers strike.

The company anticipates pre-tax earnings charges of $3 billion on the 777X and 767 programs in the Commercial Airplanes segment and expects pre-tax earnings charges of $2 billion on the T-7A, KC-46A, Commercial Crew and MQ-25 programs in the Defense, Space & Security segment.

Boeing expects to report third-quarter revenue of $17.8 billion, GAAP loss per share of $9.97 and negative operating cash flow of $1.3 billion.

Boeing Analysts Weigh In: Goldman Sachs analyst Noah Poponak maintained a Buy rating on Boeing stock and lowered the price target from $202 to $200 following the company’s preliminary third-quarter results.

The firm highlighted Boeing's better-than-expected cash flow for the quarter and the company's cost reduction plans. Goldman Sachs estimated Boeing's labor to be 15% of total cost following workforce reductions, which the analyst said could partially offset margin shortfalls elsewhere in its business.

Wall Street analysts and investors will be closely watching when Boeing reports its third-quarter results on Wednesday, Oct. 23 before the market opens. According to estimates from Benzinga Pro, the Street expects Boeing to report quarterly losses of $1.65 per share and revenue of $18.432 billion.

BA Price Action: According to Benzinga Pro, Boeing shares are down 1.54% at $148.470 at the time of publication Monday.

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