Sept. 13, 2017, (c) Leeham Co.: Boeing announced today it will boost the production rate of the 787 to 14/mo in 2019, confounding analysts who believe the rate is not warranted.
LNC‘s own analysis agrees. The backlog through Aug. 31 is 700, down 20 airplanes from Dec. 31. The book:bill rate has not exceeded one since 2013.
The rate is not sustainable, LNC believes, beyond 2020.
Boosting the rate, however, will throw off cash, helping Boeing meet its free cash flow targets at a time when the company is transitioning from the 777 Classic to the 777X. The higher rate, from 12/mo, is worth a half point on the profit margin, one analyst told LNC.
Boeing also increased the accounting block by 100. Some of Boeing’s current sales, with deliveries scheduled for well into the 2020 decade, were outside the current accounting block of 1,300 aircraft. It’s too early to conclude if the expanded block merely brings these airplanes into the block or the move reflects confidence in future demand, or both.
We’ll take a deep look at this next week.