Wednesday, January 25, 2017

Boeing Flies Past Predictions

A long time ago in a blog far far away was the sense that Boeing would make 787 money by 2017.


"One of the biggest surprises of Boeing's earnings report was the profitability of its 787 Dreamliner. Deferred production costs fell for the airliner $215 million to $27.3 billion, and last year saw unit costs for the Dreamliner finally fall below its sales price. It will be critical for Boeing to continue to improve the profitability of its cutting-edge jetliner." 

Winging It July 14, 2015 Headline:

Winging It Quote:

"I said in a prior posting, that I believe Boeing will reach Break-even when 150 787-10's are sold or delivered.  I don't know when that will happen but, I believe this can be done well before 2021, but not by 2015. Boeing will have to exhaust a significant portion of its order backlog through deliveries by 2015 to meet that goal. However, by 2015 Boeing will have all risks retired, and certainty of "when it will exactly meet, the profitability barrier beyond 2015".  A 2015 forecast for the year 2017 from Boeing, is a better forecast than this year’s 2012 forecast for 2015. Two years from now a solid view to the future will excite the investor, and I believe Boeing will state it will make money by 2017, not 2021. A financial cushion of time would lean towards 2018. Boeing will make money on the 787 project as a whole surging past its break even point late 2017 or early 2018."

I was off this prediction by a half a year for a pin point but on the mark for a 2017 to 2018 mark. There is other articles from Winging pointing to 2017 as the probable landing date where money is made. Even last year when the backlog began its financial decent it now has reached FL 27 Billion and will continue to descend until the year 2021 reaches final approach.


"Boeing will make money on the 787 project as a whole surging past its breakeven point late 2017 or early 2018."

Accounting exponentially smooths 787 Ride To Profitability:




"The best conclusion anyone draws from this, is that Boeing has retired enough risk on the 787 program. The accountants now have free reign for formulating straight lines on the graphs through exponential smoothing, while painting over the lumpy curves of cost on said graph. By a 787 unit #1,300, it becomes midnight and all is well in building 40-24, and a straight line is painted in Chicago." 


"However, the press and financiers will have a collective moment of throwing cautionary tales out for the reading public to sell copies, while financial people love conservative analysis sold to investors. So 2021 becomes the outer time limit for a conservative target date for profitability. In the mean time, an investor has time  for buy/sell;  knock you self out selling short, buying low, or dumping stock, because the crazies are running the market during any week or two period of time. But, long term investors are far more certain of success if picking a spot now and jumping in for a smooth ride.

The newspapers will continue to chase every little dust ball found on new aircraft coming out of the factory, until people stop reading those news reports that "made them look". This battle will "continue into infinity" as in some kind of "Toy Story".

Final points: To the investor, keep your eye on two big ticket items in your portfolio analysis.

·      One, the accumulation of new Boeing orders after post A-350 introduction, 
·      how much money airlines are making flying their 787's."
  

"Either way of realizing it up front, or from a deferred cost perspective it will take about 1,300 787 to pay down all costs affecting the 787 and some other unit number for the other program questioned. Boeing has chosen showing a cash positive flow sooner rather than later, by pushing the reduction of deferred costs to the back to end of this saga. Making a unit by unit delivery "contribution margin", at least until Boeing obtains a zero balance on its deferred costs account. The contribution margin comes from a 787 delivered cash mechanism applied to the deferred cost reduction from each of the frames delivered."


"However, the press and financiers will have a collective moment of throwing cautionary tales out for the reading public to sell copies, while financial people love conservative analysis sold to investors. So 2021 becomes the outer time limit for a conservative target date for profitability. In the meantime  an investor has time  for buy/sell;  knock yourself out selling short, buying low, or dumping stock, because the crazies are running the market during any week or two period of time. But, long term investors are far more certain of success if picking a spot now and jumping in for a smooth ride.

Final points: To the investor, keep your eye on two big ticket items in your portfolio analysis.


  • One, the accumulation of new Boeing orders after post A350 introduction, 
  • and how much money airlines are making flying their 787's.  

There are other Winging It spinets, but the point is made aligning with stock market acknowledgements; The 787 will land with a little or no deferred costs by 2021.