Boeing faces a structural profitability crisis due to collapsed gross margins (now 5%) and rising SG&A, leading to debt-driven dilution; management must restore margins to stabilize the stock.

Boeing beat revenue by 8%. Great job. No earnings um no earnings announcement there.

Uh Boeing, Coca-Cola. Boeing is a stock that's just been beat up. Those poor guys. Uh let's take a look how what they've been doing. Uh where's Boeing's? What am I missing? I don't remember Boeing's ticker.

Oh, it's just BA. Duh. Stock's down uh down a little this morning. Rough metrics. Let's take a look. Is trading earnings are negative. That's going to hurt. That just throws everything off.

Let's take a look at some charts. So, first of all, market cap and EV are pretty close together. So, that should mean they have relatively little debt. 27 billion of debt or so.

I guess if you have negative earnings, then that debt is still massive. No matter how how quote little it is, if you're not making any money, that debt is monstrous. Okay, so let's uh relative to the to the capbacks, it's relatively small.

Boeing 66 billion of revenue uh with negative EDA man even before depreciation they're losing weight has a rough go of it. Free cash flow operating cash flow is basically break even.

Less capbacks um they're negative. That's not good. Stockbased comp. You stockbased comp is still they're still doing two billion a year in stockbased comp. Leverage is debt levels are coming down.

I don't know how that's possible if you have negative cash flow, but okay. But the earnings are just and inventory is up quite a lot. That's not a good Oh, that's how they're doing.

They're issuing shares. There you go. That solves the problem. There you go. There's your clue. That's called dilution, my friends. If you have negative cash flow for several years, like these guys, negative earnings for several years, operating cash flow turns negative or break even. plus heavy capex business, you're going to um you're going to have to issue shares.

And they look like they they swapped equity for debt. So they paid down they cut the debt in half from roughly 40 billion. No, no, no, sorry. That's just 20. That's just a quarter from 40 billion to about 30 billion.

They brought the debt down and they issued uh about what's that 20% more stock. So they diluted all the stockholders. This is why debt is is is a problem, right? The business takes a turn.

You have to make payment to the bank or you lose the business. So you issue shares. Those issuance of shares um put downward pressure on the price of the stock, right? Because there's only so many buyers.

So the stock price goes down, you issue shares. It continues to push the stock price down. you take that money and rather than having um capex like we're seeing with Meta where you can invest it in new growth opportunities, you basically have just hand the money back to the bank um which creates no value.

All it does is is protect your ability to lose cash another another year um before you have to do the whole thing whole process all over again. So, it's a little bit of a little bit of a spiral.

They absolutely have to fix their operating margin. There is no in my opinion, this is this whole channel is my opinion, but look there they make they make 90 billion in in in revenue.

You're telling me you can't keep a single dollar of earnings out of 90 billion of of of revenue or let alone cash? That's a major problem. Like that that's an executive problem.

That is the the management. That is the senior team. That's a huge issue. Let's take a look at their P&L and figure out what on God's green earth is the problem. Well, okay, here's the problem.

Gross profit is so thin, they can't possibly make any money. So, manufacturing company that makes airplanes, right? There's Boeing and Airbus. There's two. It's a duopoly. How are margins so thin in a duopoly in in in the world?

That's shock. I mean, that just that's crazy. It seems like a mispricing to me. They should raise the price of the airplanes. I That's what I would do if you again from the cheap seats.

Um, it looks to me like their gross profit margin is not nearly where it needs to be. It used to be above 10%. It used to be 13, 14, 18% gross profit margin, which is healthy for a manufacturing company.

Um, like Boeing, it's got union labor, big heavy machine, long sales cycle, low low frequency of product, right? It's a large complicated item, right? That's now sitting at 5%.

That drop of 10% is a cut to earnings of $10 billion. That's essentially their entire profit margin went out the window when this gross profit fell. So, what the executive team needs to do is go back through and look at their market pricing, look at the volume of output they're getting, look at their labor contracts, look at everything they can, their facilities, whatever it is to get this number back down because that is not that is not uh conducive to letting the business continue to change.

And unfortunately, that's not an overnight solution. That is a manufacturing process issue. And it's going to take time to understand what the problem is, figure out a solution, implement the solution, then see the solution in the financial results.

That's it's different from a problem like if if if SGNA was too high, which incidentally it might be way too high, $6 billion of SGNA, right? SGNA is the the corporate headcount um legal lawsuits insurance um stuff that at the corporate office but that has doubled.

If you look at 2019 it was 4 billion. It's now 6 billion. Okay, it's not doubling but but revenue is flat if not down and the corporate team is making more money. No sir, that's not right.

You need to rightsize air quotes some some payroll right there and squeeze out enough money to be profitable or at least cash flow positive. So they've got they've got their own they've got their own issues.