BA Q1 Earnings Call: Boeing Addresses Tariff Uncertainty and Production Ramp, Sees Progress on Recovery

Aerospace and defense company Boeing (NYSE:BA) fell short of the market’s revenue expectations in Q1 CY2025, but sales rose 17.7% year on year to $19.5 billion. Its non-GAAP loss of $0.37 per share was 71.3% above analysts’ consensus estimates. The stock traded up 6.2% to $172.49 after reporting and hosting the earnings call.

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StockStory’s Take

Boeing’s first quarter results reflected a combination of progress in operational execution and ongoing external headwinds. Management attributed the quarter’s outcome to improvements in production stability, particularly on the 737 and 787 programs, and actions taken to contain costs amid persistent supply chain and tariff pressures. CEO Kelly Ortberg emphasized that the company’s four-point recovery plan is showing early results, noting, “We continue to implement our safety management system and remain on schedule with our safety and quality plan that we’ve established with the FAA.”

Looking ahead, leadership signaled that the company’s guidance is influenced by several factors. Management outlined a cautious approach to raising production rates, highlighted risks stemming from ongoing and potential retaliatory tariffs—especially in China—and pointed to portfolio streamlining initiatives like the digital aviation divestiture as key to supporting the balance sheet. Ortberg stated, “We planned the ramp up conservatively so that we had some capacity to deal with unknown challenges,” while CFO Brian West underscored that Boeing’s conservative cash plan anticipates continued volatility in deliveries and input costs.

Key Insights from Management’s Remarks

Operational improvements and external pressures shaped Boeing’s results, with management highlighting manufacturing discipline, supply chain management, and portfolio actions as central to performance.

• Production discipline and delivery ramp: Boeing’s operational KPIs (key performance indicators) for production stability improved, notably on the 737 line, where traveled work and rework hours were cut significantly. The 787 program also exited its ‘shadow factory’ phase, enabling resource redeployment.

• China tariff exposure and delivery risk: Leadership identified China as the only region where tariffs are currently affecting aircraft deliveries. Options to remarket planes originally bound for China are under review, and management is working closely with the U.S. government to seek a negotiated resolution.

• Portfolio streamlining and divestiture: The planned sale of portions of Boeing’s digital aviation solutions business will provide a significant cash infusion. Management indicated more divestitures may follow to maintain focus on core products and capabilities.

• Defense program progress: Boeing secured the contract for the U.S. Air Force’s next-generation fighter (F-47), which management described as a “transformational accomplishment.” Stability on existing defense programs was credited for improved margins.

• Cultural and process changes: The company is implementing new values and behaviors through an enterprise-wide culture refresh, with an all-employee survey and updated performance management processes aimed at supporting operational improvements.

Drivers of Future Performance

Management’s outlook is anchored in maintaining production stability, navigating tariff uncertainties, and executing on portfolio and development initiatives to strengthen cash flow and margins.

• Tariff and geopolitical headwinds: Ongoing and potential retaliatory tariffs, especially concerning China, present risks to delivery schedules and cash flow. Management stated that most input tariffs are manageable but closely monitoring potential market access issues.

• Production rate increases: Boeing expects to ramp 737 and 787 production as operational KPIs stabilize, with each rate increase dependent on demonstrated manufacturing discipline and FAA oversight. Leadership emphasized that long-term demand remains strong despite near-term delivery volatility.

• Portfolio optimization: Proceeds from digital asset sales and potential further divestitures are expected to bolster the balance sheet and focus resources on core aerospace and defense businesses. Management believes these actions will help offset cash flow impacts from tariffs and delivery delays.

Top Analyst Questions

• Doug Harned (Bernstein): Asked about efforts to address tariff uncertainty with U.S. and international policymakers. CEO Kelly Ortberg described ongoing engagement with administration officials and expressed hope for a negotiated resolution but acknowledged timing remains unpredictable.

• Myles Walton (Wolf Research): Sought clarification on delivery expectations for 737 and 787 programs given China-related risks. CFO Brian West said full-year projections remain in place, with strong operational starts offsetting China delivery pressures.

• Seth Seifman (JPMorgan): Inquired about the cost impact of tariffs and supplier pricing adjustments. Management estimated input tariffs would remain below $500 million annually and are working to help suppliers manage cost recovery without supply disruption.

• Scott Deuschle (Deutsche Bank): Requested an update on full-year free cash flow expectations and cadence. West indicated no change to the prior range, with positive cash flow expected in the second half as production ramps.

• Sheila Kahyaoglu (Jefferies): Asked about production ramp plans and supply chain risks post-2025. Ortberg said demand remains robust, and rate increases will proceed as KPIs allow, with supply chain inventory at sufficient levels to support growth.

Catalysts in Upcoming Quarters

In tracking Boeing’s progress over the next few quarters, our analysts will focus on (1) the company’s ability to execute planned production rate increases for the 737 and 787 families, (2) any developments in the trade and tariff environment that could affect aircraft deliveries—especially to China, and (3) the impact of portfolio streamlining measures, including additional divestitures, on cash flow and operational focus. Execution on defense program milestones and maintaining production discipline will also be critical signposts.

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