Boeing's Delivery Surge Masks Persistent Turnaround Risks

What happened

Boeing is set to report its highest annual airplane deliveries since 2018, indicating progress in its production ramp-up under FAA oversight. The company plans to outline 2026 production targets later this month, which could fuel optimism about future growth. However, the DeepValue report highlights that Boeing remains a high-risk turnaround with loss-making segments, negative equity, and heavy leverage. Despite a 33% stock rally, the valuation embeds expectations for sustained production increases and successful certification of delayed programs. Investors should view this delivery uptick as a positive step, but it does not address underlying financial vulnerabilities or execution risks.

Implication

Boeing's improved deliveries suggest that production constraints are easing, potentially boosting near-term revenue and cash flow. However, the company's core commercial and defense segments are still unprofitable, with negative equity and volatile free cash flow persisting. High debt levels and interest coverage issues amplify sensitivity to any new safety incidents or program delays. The stock's 33% rally may have already priced in this recovery, offering limited margin of safety for new investors. Therefore, investors should wait for multiple quarters of stable execution, positive free cash flow, and debt reduction before considering a position change.

Thesis delta

The news aligns with the DeepValue report's watch item on production stability, confirming that Boeing's recovery is progressing as anticipated. However, it does not materially shift the investment thesis, as structural challenges like program losses, leverage, and safety risks remain unaddressed. The 'WAIT' stance remains appropriate until clearer evidence of durable cash generation and balance-sheet repair emerges.