Boeing (BA) Stock: Cash Flow and the 737 Rate Matter Most
Boeing lost $428 million in the second quarter, or 67 cents a share, and produced $631 million of free cash flow in the same three months. Both numbers are true, and only one of them tells you whether the company is getting better. I would spend my time on the second.
The stock sits around $198.20 as I write this, which is 22.1% below its 52-week high of $254 and only 12% above the low of $177. The market cap is about $156.7 billion. On trailing earnings of $2.78 a share that is a P/E of 71.3, a number so large it stops being informative. Boeing is not priced on what it earns today. It is priced on what a fixed-up production system might earn in three or four years, and my job here is to decide which quarterly numbers deserve to move that estimate.
My view: for the next several quarters Boeing is a cash-flow and production-rate story, and GAAP earnings are mostly noise. If the 737 holds 47 a month and free cash flow stays positive, the recovery is real. If either stalls, the backlog does not rescue the shares.
A loss that hides a better quarter
Start with what the company reported for the quarter. Revenue was $24.6 billion, up 8% from a year earlier and 11% above the first quarter. Commercial airplane deliveries came to 171. Operating cash flow was about $1.36 billion and free cash flow $631 million. Leeham News, which covers the industry closely, put the year-ago free cash flow at roughly negative $200 million, so the swing is around $830 million in twelve months. That is the number I would circle.
The loss itself had an identifiable cause. The defense unit booked $280 million of losses on the VC-25B program, the Air Force One replacement. Fixed-price development contracts have been a recurring sore spot at Boeing, and I treat this as a known category of pain rather than a new problem. It is also the kind of charge that arrives in lumps. One quarter carries it, the next does not, and any EPS comparison is then a comparison of lumps.
The quarter did not clear the bar on earnings. The stock still moved up on the print, and the DB shows a +4.8% move after the 2026-07-28 report against an average earnings-day move of 4.1%. I will not tell you why it moved, because a one-day price change has too many causes. I will only note that a company reporting a loss and rising is a company whose buyers were watching something other than the loss.
Why 47 a month is the number
Revenue and margin at Boeing run through one physical fact: how many 737 MAX jets leave the factory each month. Boeing says the program transitioned to a rate of 47 a month in the quarter, and Leeham puts the second-quarter average closer to 43, so the plant is at the start of that step, not the end of it. A new North Line in Everett has also begun low-rate production, which matters because a second line is what lets the rate rise without stressing the first one.
Why does the rate carry so much weight? Each additional airplane per month brings a fixed cost base that is already paid for. Engineers, inspectors, supplier contracts and factory floor do not double when output rises 10%. Cash arrives at delivery, and it arrives in large blocks. A single narrowbody delivered means the customer pays the balance due, including the portion held back until handover. Multiply that by four or five extra aircraft a month and you can see how a company that burned cash for years can turn a corner quickly, provided the line runs cleanly.
A production rate is also harder to dress up than a profit figure. Reported earnings depend on accounting judgment: how you estimate the cost of finishing a program, when you recognize a reach-forward loss, how you treat a supplier claim. A count of finished airplanes has no such flexibility. Either the jets rolled out or they did not. That is why I put more faith in the count.
| Item | Second quarter 2026 | Why it matters |
|---|---|---|
| Revenue | $24.6 billion (+8% year over year) | Growth is coming from volume, not price |
| Net loss | $428 million (67 cents a share) | Includes $280 million VC-25B defense charge |
| Free cash flow | $631 million | About $830 million better than a year ago |
| Deliveries | 171 airplanes | The physical output behind the cash |
| Backlog | $715 billion (record) | Demand is not the constraint |
Cash guidance is modest, and that helps
Boeing guides full-year 2026 free cash flow to $1 billion to $3 billion. After the first half the company was still around negative $0.8 billion, so it needs a strong back half to land in range. The second quarter’s $631 million helped, but it does not settle the year.
I like the guidance for a specific reason: it is not heroic. A range that starts at $1 billion tells me management is not asking to be believed on a big number. Compare that with the multi-year stretch when the company burned billions and the talk in the market turned to whether its credit rating could hold. Going from burn to a small positive number is the important transition. Getting from $2 billion to $10 billion is a later argument.
The balance sheet is where that transition pays off. Positive free cash flow lets a company retire debt instead of issuing more of it, and every dollar of debt repaid trims interest cost that then falls to profit. If you want a contrast with a company that returns cash to owners rather than repairing itself, I wrote about that in Apple’s services margin and buybacks, and the difference in what those two shareholders are waiting for is stark. Boeing shareholders are waiting for the repairs to finish.
One more cautionary item on cash. Leeham notes the 777X is expected to consume around $2 billion through 2027 before its first delivery, targeted for 2027. So even if the 737 line runs perfectly, some of what it earns goes to another program. That is a reason to keep the free cash flow target modest, not a reason to doubt it.
What the valuation is asking
The market is not paying for the current profit, so let me look at what it is paying for. The forward EPS estimate is $2.07, which is -26% from trailing $2.78. Yes, forward earnings are lower than trailing. That means the stock trades at about 95.8 times forward earnings, and I would not use either P/E to judge value. Price to sales is a steadier anchor: 1.8 times now, against a five-year average of 1.8, and 1.6 on forward revenue. By that yardstick the shares are priced at their own recent norm, with no premium for a recovery.
Fiscal 2025 numbers deserve a caution. The database shows revenue of $89.5 billion, up 34% from $66.5 billion in 2024, and net income of $2.2 billion against a loss of $-11.8 billion the year before. Yet operating income was $-5.4 billion. A positive net income sitting on a negative operating result means something outside operations lifted net income. I have not traced that item in the filings, so I will not name it. The point for a reader is that the net income line for 2025 was not the earning power of the airplanes.
Analysts are far more optimistic than the tape. The average target of $275 implies 39% upside from here, the low target of $250 still sits 26% above the price, and the high of $305 is 54% higher. Of 18 analysts, 94% rate it a buy. I take that with some salt. When nearly every analyst is a buyer and even the lowest target is above the market, it usually says as much about how the coverage universe forms as about the stock. The quant grade in my database is D, unchanged from earlier, which tells me the numbers-driven screens do not share the enthusiasm. Short interest is only 2.0%, so there is no crowded bearish bet waiting to unwind either.
For a comparison of how I treat a lower multiple with a steadier business, Alphabet at 20 times earnings is the opposite case. That company is cheap on earnings and quiet on operations. Boeing is expensive on earnings and loud on operations. They ask different things of an owner.
Demand is not the risk, oversight is
Airlines want more jets than Boeing and Airbus can build. The company puts its total backlog at $715 billion, a record, and commercial airplanes account for $597 billion of it, covering more than 6,200 aircraft. Nobody needs to be persuaded to buy a 737.
The constraint is how fast the factory can make them and the regulators allow them.
That second constraint is the one I cannot forecast. The FAA capped 737 output after the January 2024 door-plug accident, and rate increases have been gated by its sign-off since. The recent record of quality fixes looks better, and Boeing’s move to 47 a month suggests the regulator is comfortable enough to permit the next step. But comfort can reverse in a week. One new quality escape, one grounding directive, one failed audit and the ramp pauses. Nothing in the financial statements can predict that, which is why I keep position sizing modest for this kind of business and say so plainly.
There is also a certification schedule outside the 737-8. The 737-7 and 737-10 have finished certification flight testing, with certification expected in 2026 and first delivery in 2027. Those variants matter for customers who want a smaller or larger jet, and a delay there would not hurt this year’s cash, but it would push out the mix improvement I am counting on later.
Defense is the quieter drag
The defense unit lost $15 million on $7.47 billion of revenue in the quarter, so it is close to break-even before the VC-25B loss is separated. Commercial airplanes lost $322 million on $11.8 billion. Even in a quarter with cash coming back, neither segment made an operating profit. I find that a useful antidote to optimism. The cash swing is real, but the business is still recovering, not compounding. A reader who sees $631 million of free cash and imagines a healthy earner is reading the wrong line.
Where would the cash come from, then, if not operating profit? Mainly from deliveries. Customers pay large sums when they take an aircraft, and Boeing collects advances on future orders. Timing is a big part of it. If deliveries slip a month, cash slips with them, and one weak quarter can swing free cash flow by hundreds of millions. That is why I would look at first-half free cash flow of negative $0.8 billion next to the second-quarter positive figure rather than celebrating one quarter alone.
The case against my view
Here is how I could be wrong. First, the rate could stall. If Boeing announces that 47 a month is pushed out, or if the quarterly average stays in the low 40s for two more reports, then my premise that cash builds through volume fails. Second, the cash guide could be missed: if free cash flow for the year lands under $1 billion, the debt-paydown story slips a year. Third, the market could already be right that the equity is expensive. At 71.3 times trailing earnings and 1.8 times sales, the price assumes execution, and a company priced that way has little room for another program charge.
The opposite error is also possible. A reader who waits for a clean quarter with no charges may wait a long time, because fixed-price defense work and a still-maturing widebody program will keep producing lumps. I would not demand perfection. I would demand direction.
The 47-a-month test for the next two quarters
Here is what I will watch.
If the third-quarter report shows a 737 rate that holds at 47 and free cash flow above zero again, I would read the second quarter as the start of a trend. If the rate slips or cash turns negative, I would read it as a good quarter in a long repair.
Specifically, I want the full-year free cash flow to be tracking at $1 billion or better by the end of the third quarter. That is a threshold I can check, and it needs about $1.8 billion of cash across the second half to get there from the first-half figure. Anything under that and I would trim my view of the recovery timeline, whatever the backlog says.
Analysis and opinion only, not investment advice. Figures come from Boeing’s second-quarter 2026 results, Leeham News coverage of them, and filings on SEC EDGAR; market data and valuation multiples come from my own database and are approximate, checked on September 18, 2026.