Boeing (NYSE:BA) Co. has issued a warning that the delivery of its 737 jetliner, a key revenue driver for the company, will likely hit the lower end of its target range for this year. The adjustment comes in light of a recently discovered supplier glitch that has hindered output. This announcement was made by Chief Financial Officer (CFO) Brian West at an investor conference on Thursday.
The aerospace giant had previously set a goal to ship between 400 to 450 of the popular 737 jets this year. However, West indicated that the handovers of these narrowbody aircraft would be near the bottom of this range. He also projected that profit margins for both commercial and defense units would be negative in the third quarter.
This setback comes just a month after Boeing reported impressive Q2 earnings and guided to higher output of Boeing 737s. In August, the company announced plans to increase its 737 jetliners' manufacturing pace by 23%, raising output to a monthly rate of 38 jets. The company also stated its intention to reach a level of 50 737s per month in the 2025/2026 timeframe.
However, the US planemaker delivered only 22 of its narrowbody jetliners in August, which is significantly lower than the guided rate. Despite this, West expects to ship about 70 of these jets during Q3.
Last month, Boeing disclosed that some holes in the 737 bulkheads, essential for maintaining cabin pressure, were improperly drilled by supplier Spirit AeroSystems (NYSE:SPR) Holdings Inc. This issue was expected to cause near-term delivery delays as Boeing assessed its impact on the annual delivery target while working to increase output.
This manufacturing defect potentially dates back years and adds to Boeing's challenges as it also contends with an earlier issue from Spirit involving brackets used to attach the 737’s vertical fin to the main fuselage.
Despite these setbacks, West assured that Boeing remains on track to generate between $3 billion and $5 billion in free cash flow this year. The company's mid-decade targets for cash, 737 and 787 Dreamliner production remain unchanged, according to West. However, he did note that the cash flow would be slightly negative in the third quarter.
Following the announcement, shares of Boeing slipped 0.2%, while Spirit fell by 1.8%.
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