On September 11, a caller praised The Boeing Company’s (NYSE:BA) CEO and asked when the company would overcome the ongoing labor uncertainty and finally move beyond years of sideways stock performance. Mad Money host Jim Cramer replied:
I think that Boeing is ready to go up. But here’s the problem. Every time crude goes up a dollar, the stock goes down a dollar. And that, think about it, that was actually the ratio. I did some work on this. And because today crude was down, Boeing went up $5… No, it’s so stupid because, in truth, the airlines need more planes because the planes are more fuel-efficient. So they actually do better in this environment, but nobody cares. They know that airlines have to borrow money to buy planes and rates are higher, and they think that oil somehow’s bad. But what ends up happening is the stock does nothing. I think it’s about to go up because I think oil might be peaking unless there’s some catastrophe over there.
Boeing’s Recovery is Still Dependent on Execution
The Boeing Company’s second-quarter results showed improving cash generation, but profitability remained weak. Revenue rose 8% year over year to $24.6 billion, while operating cash flow reached $1.4 billion and free cash flow was $631 million. Its total backlog reached a record $715 billion, including more than 6,200 commercial airplanes. CEO Kelly Ortberg said, “We’re ramping up production just as we planned. That’s driving higher revenues and improved cash flow.” He also said there’s more work ahead to ramp production, complete commercial-aircraft certifications and uphold customer commitments. Boeing said the 737-7 and 737-10 had completed flight testing, with deliveries expected to begin in 2027.
Boeing’s Backlog Has Yet to Deliver Sustainable Profits
The Boeing Company’s large backlog has yet to translate into consistent commercial-aircraft profitability, leaving execution and margins as important concerns for investors. Commercial Airplanes delivered 171 aircraft in the second quarter but still posted a $322 million operating loss and a negative 2.7% operating margin. It also reported a $428 million GAAP net loss.
The balance sheet leaves less room for further setbacks. The company ended June with $45.9 billion of consolidated debt against $20 billion of cash and investments in marketable securities. The FAA certified the 737-7 on August 3, while Boeing continues working toward certification of the 737-10. First deliveries of the variants are expected in 2027. The company also recorded $280 million of losses on the VC-25B program in the quarter.
Hedge Fund Participation Has Declined
Insider Monkey, which tracks more than 1,000 hedge funds, recorded 90 hedge funds holding Boeing in the second quarter, down from 99 in the first quarter. Of those funds, Pentwater Capital Management was the most significant shareholder in Q2 and reduced its position by 13% to 6.2 million shares. Short interest was approximately 2.0% to 2.1% of Boeing’s float.
Lower oil could improve sentiment toward The Boeing Company, as Cramer pointed out, but it does not address the company’s main challenge. Boeing still needs to convert its backlog into higher production, positive cash flow, and sustainable commercial-aircraft margins before its recovery can be considered firmly established.
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