Investment Rationale
Despite inconsistent execution under prior management, we believe the transformation investors have been anticipating is materializing under Ortberg’s leadership. Furthermore, Boeing has emerged as one of the primary beneficiaries of the Trump administration’s trade agreements with international partners.
Competitor: Airbus
Initiation Date: September 8, 2025
Most Recent Purchase: March 19, 2026
Portfolio Weighting: 3.2%
Executive Summary
Boeing advanced its turnaround strategy during the second quarter, with free cash flow serving as the most telling indicator of progress at this stage of Ortberg’s tenure. “That’s why I think that you can still buy Boeing here,” said Jim Cramer on Tuesday’s Morning Meeting, commenting on the company’s cash flow performance. In response, we are upgrading our recommendation on the stock to a buy-equivalent rating of 1. Our price target remains unchanged at $275 per share. Boeing now joins our portfolio of aerospace holdings following the spin-off of Honeywell Aerospace into an independent entity late last month. On Monday, we increased our stake in Honeywell Aerospace, which produces avionics systems, engines for smaller aircraft, and other critical components that form the core of modern planes. The company serves as a key supplier to both Boeing and its main competitor, Airbus.
Quarterly Analysis
A central focus for Ortberg involves enhancing Boeing’s manufacturing efficiency and output, particularly after U.S. regulators imposed restrictions on monthly production rates for the popular 737 Max family following the door-panel incident involving Alaska Airlines in January 2024. Since customers typically make substantial payments upon delivery, increasing production directly impacts cash inflows. As free cash flow improves, earnings are expected to follow suit. Although Boeing reported a net loss for the April-to-June period, positive developments include regulatory approval from the Federal Aviation Administration to raise 737 Max production. The agency increased the monthly cap from 38 to 42 units in October, then to 47 in late May. Boeing’s next target is 52 units per month, with longer-term goals set at 57 and eventually 63. During Tuesday’s earnings call, Ortberg confirmed that the ramp-up to 47 units has begun and projected factory output reaching that level by summer. He noted that early production quality metrics align with expectations, citing foundational improvements made to facility operations. While questions remain regarding whether Boeing’s supply chain can sustain higher 737 production volumes, Ortberg expressed confidence that scaling from 47 to 52 units should not pose significant challenges. “We will go when we’re ready,” he stated, acknowledging that future increases beyond 52 will present greater difficulties. “We are on our plan. Our plan is working.” As Boeing continues to refine its production schedule, Jim noted that cash generation is poised to become substantial. This same principle applies to Boeing securing certifications for updated versions of existing aircraft, including the single-aisle 737 Max 7 and Max 10, along with the wide-body 777X designed for long-haul travel. Demand for these models remains strong within Boeing’s backlog, but deliveries cannot proceed until FAA approval is granted. Ortberg indicated that certification for the 737 Max 7 is imminent, with Max 10 approval expected shortly thereafter. “These developments pave the way for deliveries beginning in 2027, and I’m confident these newest additions to the 737 Max family will fulfill our commitment to enhanced efficiency and expanded capabilities for our customers,” Ortberg said. Currently, the Max 8 and Max 9 variants are operational in commercial fleets worldwide. The 777X continues on track for initial delivery next year after advancing through additional test flight phases during the second quarter. Collectively, these factors suggest Boeing is effectively scaling 737 Max production to accommodate upcoming deliveries of current variants while maintaining timelines for Max 7 and Max 10 rollouts next year. There have been no changes to the 777X delivery schedule. With a record commercial backlog valued at approximately $597 billion encompassing over 6,200 aircraft, Boeing must accelerate jet deliveries to meet demand. All indicators from Tuesday’s report support continued progress in the coming quarters and beyond. There were no major unexpected issues in Boeing’s commercial aviation division. Indeed, the company reaffirmed its projection for 500 aircraft deliveries in 2026 and projected full-year free cash flow between $1 billion and $3 billion. CFO Jay Malave also reinforced expectations for sustained cash flow growth beyond 2026, stating that achieving $10 billion in annual free cash flow is “very attainable.” Analysts on Wall Street project $10 billion in free cash flow by 2028. Not all aspects of the report were positive. The primary concern arose in Boeing’s defense and space segment, which contributes nearly one-third of total revenue. The company recorded a $280 million charge related to its delayed and over-budget Air Force One replacement program, officially designated as the VC-25B initiative. This provision contributed to the earnings-per-share shortfall. Ortberg explained that Boeing made the strategic decision during the quarter to allocate additional resources toward accelerating the build and testing schedule for VC-25B, asserting that these investments will reduce risks during certification and flight testing phases. Although he described the charge as “disappointing,” Ortberg emphasized that Boeing is committed to fulfilling its obligation to deliver the aircraft by 2028. Boeing secured a $4 billion fixed-price contract in February 2018, during President Donald Trump’s first term, to modify two 747 jumbo jets for use as Air Force One. The agreement placed Boeing responsible for any cost overruns, which have since emerged as delivery timelines slipped. Ortberg’s predecessor, Dave Calhoun, previously acknowledged that Boeing “probably” should not have accepted the terms of the deal initially. It’s difficult to dispute both Calhoun’s earlier assessment and Ortberg’s recent remarks. While we aren’t pleased to see further charges in the defense business, it ultimately serves Boeing’s long-term interests to resolve this Air Force One modernization effort. Should additional investments be necessary to achieve this goal, we as shareholders can accept that trade-off, provided the commercial division maintains its momentum. Another point worth noting: Prior to the quarter, some analysts highlighted Boeing’s ongoing negotiations with a labor union representing engineers and technical staff as a potential risk in the months ahead. The current contract expires in October. During Tuesday’s call, Ortberg revealed that Boeing initiated discussions with the union—the Society of Professional Engineering Employees in Aerospace (SPEEA)—earlier than required and reported that conversations have thus far been “respectful and productive.” When pressed for specifics during the question-and-answer session, Ortberg declined to elaborate further, calling it “inappropriate” to discuss details publicly. He added, “I’ll just say that we’re keenly focused on it. … I’m very hopeful that we’ll reach an agreement and maintain our current momentum.”
(Jim Cramer’s Charitable Trust holds a position in BA. For a complete list of stocks held, please visit the provided link.)
As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade notification prior to any transaction executed by Jim. Jim waits 45 minutes after issuing a trade alert before purchasing or selling a stock in his charitable trust portfolio. If Jim references a stock on CNBC television, he waits 72 hours after issuing the trade alert before executing the trade.
The above Investing Club information is subject to our Terms and Conditions and Privacy Policy, along with our Disclaimer. No fiduciary obligation or duty exists, or is created, by virtue of your receipt of any information provided in connection with the Investing Club. No specific outcome or profit is guaranteed.
Investment Rationale
Despite inconsistent execution under prior management, we believe the transformation investors have been anticipating is materializing under Ortberg’s leadership. Furthermore, Boeing has emerged as one of the primary beneficiaries of the Trump administration’s trade agreements with international partners.
Competitor: Airbus
Initiation Date: September 8, 2025
Most Recent Purchase: March 19, 2026
Portfolio Weighting: 3.2%
Executive Summary
Boeing advanced its turnaround strategy during the second quarter, with free cash flow serving as the most telling indicator of progress at this stage of Ortberg’s tenure. “That’s why I think that you can still buy Boeing here,” said Jim Cramer on Tuesday’s Morning Meeting, commenting on the company’s cash flow performance. In response, we are upgrading our recommendation on the stock to a buy-equivalent rating of 1. Our price target remains unchanged at $275 per share. Boeing now joins our portfolio of aerospace holdings following the spin-off of Honeywell Aerospace into an independent entity late last month. On Monday, we increased our stake in Honeywell Aerospace, which produces avionics systems, engines for smaller aircraft, and other critical components that form the core of modern planes. The company serves as a key supplier to both Boeing and its main competitor, Airbus.
Quarterly Analysis
A central focus for Ortberg involves enhancing Boeing’s manufacturing efficiency and output, particularly after U.S. regulators imposed restrictions on monthly production rates for the popular 737 Max family following the door-panel incident involving Alaska Airlines in January 2024. Since customers typically make substantial payments upon delivery, increasing production directly impacts cash inflows. As free cash flow improves, earnings are expected to follow suit. Although Boeing reported a net loss for the April-to-June period, positive developments include regulatory approval from the Federal Aviation Administration to raise 737 Max production. The agency increased the monthly cap from 38 to 42 units in October, then to 47 in late May. Boeing’s next target is 52 units per month, with longer-term goals set at 57 and eventually 63. During Tuesday’s earnings call, Ortberg confirmed that the ramp-up to 47 units has begun and projected factory output reaching that level by summer. He noted that early production quality metrics align with expectations, citing foundational improvements made to facility operations. While questions remain regarding whether Boeing’s supply chain can sustain higher 737 production volumes, Ortberg expressed confidence that scaling from 47 to 52 units should not pose significant challenges. “We will go when we’re ready,” he stated, acknowledging that future increases beyond 52 will present greater difficulties. “We are on our plan. Our plan is working.” As Boeing continues to refine its production schedule, Jim noted that cash generation is poised to become substantial. This same principle applies to Boeing securing certifications for updated versions of existing aircraft, including the single-aisle 737 Max 7 and Max 10, along with the wide-body 777X designed for long-haul travel. Demand for these models remains strong within Boeing’s backlog, but deliveries cannot proceed until FAA approval is granted. Ortberg indicated that certification for the 737 Max 7 is imminent, with Max 10 approval expected shortly thereafter. “These developments pave the way for deliveries beginning in 2027, and I’m confident these newest additions to the 737 Max family will fulfill our commitment to enhanced efficiency and expanded capabilities for our customers,” Ortberg said. Currently, the Max 8 and Max 9 variants are operational in commercial fleets worldwide. The 777X continues on track for initial delivery next year after advancing through additional test flight phases during the second quarter. Collectively, these factors suggest Boeing is effectively scaling 737 Max production to accommodate upcoming deliveries of current variants while maintaining timelines for Max 7 and Max 10 rollouts next year. There have been no changes to the 777X delivery schedule. With a record commercial backlog valued at approximately $597 billion encompassing over 6,200 aircraft, Boeing must accelerate jet deliveries to meet demand. All indicators from Tuesday’s report support continued progress in the coming quarters and beyond. There were no major unexpected issues in Boeing’s commercial aviation division. Indeed, the company reaffirmed its projection for 500 aircraft deliveries in 2026 and projected full-year free cash flow between $1 billion and $3 billion. CFO Jay Malave also reinforced expectations for sustained cash flow growth beyond 2026, stating that achieving $10 billion in annual free cash flow is “very attainable.” Analysts on Wall Street project $10 billion in free cash flow by 2028. Not all aspects of the report were positive. The primary concern arose in Boeing’s defense and space segment, which contributes nearly one-third of total revenue. The company recorded a $280 million charge related to its delayed and over-budget Air Force One replacement program, officially designated as the VC-25B initiative. This provision contributed to the earnings-per-share shortfall. Ortberg explained that Boeing made the strategic decision during the quarter to allocate additional resources toward accelerating the build and testing schedule for VC-25B, asserting that these investments will reduce risks during certification and flight testing phases. Although he described the charge as “disappointing,” Ortberg emphasized that Boeing is committed to fulfilling its obligation to deliver the aircraft by 2028. Boeing secured a $4 billion fixed-price contract in February 2018, during President Donald Trump’s first term, to modify two 747 jumbo jets for use as Air Force One. The agreement placed Boeing responsible for any cost overruns, which have since emerged as delivery timelines slipped. Ortberg’s predecessor, Dave Calhoun, previously acknowledged that Boeing “probably” should not have accepted the terms of the deal initially. It’s difficult to dispute both Calhoun’s earlier assessment and Ortberg’s recent remarks. While we aren’t pleased to see further charges in the defense business, it ultimately serves Boeing’s long-term interests to resolve this Air Force One modernization effort. Should additional investments be necessary to achieve this goal, we as shareholders can accept that trade-off, provided the commercial division maintains its momentum. Another point worth noting: Prior to the quarter, some analysts highlighted Boeing’s ongoing negotiations with a labor union representing engineers and technical staff as a potential risk in the months ahead. The current contract expires in October. During Tuesday’s call, Ortberg revealed that Boeing initiated discussions with the union—the Society of Professional Engineering Employees in Aerospace (SPEEA)—earlier than required and reported that conversations have thus far been “respectful and productive.” When pressed for specifics during the question-and-answer session, Ortberg declined to elaborate further, calling it “inappropriate” to discuss details publicly. He added, “I’ll just say that we’re keenly focused on it. … I’m very hopeful that we’ll reach an agreement and maintain our current momentum.”
(Jim Cramer’s Charitable Trust holds a position in BA. For a complete list of stocks held, please visit the provided link.)
As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade notification prior to any transaction executed by Jim. Jim waits 45 minutes after issuing a trade alert before purchasing or selling a stock in his charitable trust portfolio. If Jim references a stock on CNBC television, he waits 72 hours after issuing the trade alert before executing the trade.
The above Investing Club information is subject to our Terms and Conditions and Privacy Policy, along with our Disclaimer. No fiduciary obligation or duty exists, or is created, by virtue of your receipt of any information provided in connection with the Investing Club. No specific outcome or profit is guaranteed.
