Troubled American planemaker Boeing Co. BA is down 1.7% in premarket trading on Friday after the company said that it expects to report an operating cash flow loss of $3.5 billion for the fourth quarter owing to the work stoppage by the International Association of Machinists and Aerospace Workers (IAM), in addition to other factors.
What Happened: Boeing on Thursday said that it expects to report fourth-quarter revenue of $15.2 billion versus estimates of $16.27 billion and a GAAP loss per share of $5.46, nearly triple market expectations. The results, it said were impacted by the worker’s strike as well as certain charges for certain Defense, Space & Security programs in addition to costs associated with workforce reductions announced in 2024.
The company said that its commercial airplanes segment will reflect pre-tax earnings charges of $1.1 billion on the 777X and 767 programs owing to higher estimated labor costs associated with the new workers’ agreement. Boeing now expects fourth-quarter revenue of $4.8 billion and an operating margin loss of 43.9% for the segment.
The Defense, Space & Security segment, meanwhile, is expected to recognize pre-tax earnings charges of $1.7 billion on multiple programs, reflecting higher estimates of manufacturing costs and including the impact of the workers’ strike, it said. The division is expected to report fourth-quarter revenue of $5.4 billion and an operating margin loss of 41.9%.
Why It Matters: The IAM strike went on for nearly two months until it was concluded in November. The strike ended with a new four-year contract that included a 38% wage increase over four years, enhanced retirement contributions, and improved health benefits.
However, the strike is only the latest of the company’s hardships.
Boeing has been faced with one crisis after the other over the past few years, starting in late 2018 when a Boeing aircraft went down in the sea off the coast of Indonesia. Another fatal crash followed in a few months, causing the 737 Max jet to be grounded for months worldwide.
In January 2024, a door panel flew off an Alaska Airlines plane manufactured by Boeing, creating further safety concerns. The Covid-19 pandemic in the middle did not help the company's financial constraints.
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