Aerospace Troubled Trio: After a series of production hiccups, investors are now scrutinizing U.S. aerospace’s “problem children” – Boeing, RTX, and Spirit AeroSystems. These three giants are expected to report losses in their third-quarter results as they grapple with manufacturing defects in their most profitable aircraft and engine products. Pratt & Whitney, RTX’s engine subsidiary, has revealed a whopping $3 billion charge for replacing components contaminated with metal powder in up to 700 Geared Turbofan (GTF) engines.
Meanwhile, Boeing and Spirit, a key supplier for Boeing and Airbus, are dealing with the fallout of misdrilled holes on Boeing’s 737 MAX, leading to expanded inspections. Vertical Research Partners analyst Rob Stallard has aptly termed these companies the “problem children” of the sector.
RTX is predicted to report a loss of 24 cents per diluted share, a stark contrast to a profit of 94 cents a year ago. Boeing is expected to announce a loss of $2.23 per diluted share, in contrast to a loss of $5.49 a year ago. Spirit, on the other hand, is projected to report a loss of $1.03 per share, compared to a loss of $1.22 a year earlier, according to LSEG data. RTX, being the first to unveil its results on Tuesday, will face continued scrutiny over the GTF engine issue.
Also Read: Boeing 737 MAX Quality Flaw: A Turbulence in Aerospace Precision
Analysts are growing concerned that shop visits may drag on longer than expected, or that a higher volume of engines – or additional engine types – could be affected, potentially leading to higher compensation to customers.
Boeing investors will be keeping a keen eye on the 2023 free cash-flow generation, which the company had projected to be between $3 billion and $5 billion. However, achieving this target may be increasingly challenging if Boeing struggles to meet its goal of delivering 400 737s this year.
In the midst of these challenges, Spirit is scheduled to release its results on November 1 and has already disclosed preliminary results as part of a new price agreement with Boeing. The earnings call will be a pivotal moment for newly-appointed interim CEO Patrick Shanahan, a former Boeing executive and Spirit board member known for tackling complex operational issues.
The appointment of Shanahan underscores the critical nature of Spirit’s current situation, as mentioned by Michel Merluzeau, director of aerospace analysis at AIR consultancy group. Investors are eagerly awaiting details on Shanahan’s plan to restore the embattled supplier’s balance sheet and get aircraft production back on track.