FY25 600 Commercial Deliveries (Highest Since 2018), Record $567B Backlog, Spirit + Jeppesen Closed, FY26 FCF Guide +$1–$3B Positive, $10B Long-Term Target "Very Attainable" — Upgrading to Outperform

Coverage Update — Why Upgrade Now

We initiated at Hold in July at ~$233 with a $200–$260 fair value range, identifying three binary risks (777X cert, BDS fixed-price tail, multi-year rate progression). In October we maintained Hold at ~$215 after the $4.9B 777X charge shifted FY26 FCF expectations down ~$2B, lowering the range to $200–$255. This print delivers what we needed to see for an upgrade: (1) FY26 FCF guide explicitly positive at $1–3B — the first full positive cash year since 2018; (2) the $10B long-term framework re-confirmed by the new CFO as "very attainable"; (3) Spirit + Jeppesen transactions executed cleanly; (4) BDS held EACs for fourth consecutive quarter (modest KC-46 production-support charge does not break the structural pattern); (5) record backlog provides multi-year revenue visibility. The risk-reward at ~$220 with a credible path to ~$300 over 18–24 months is structurally attractive. We upgrade to Outperform.

Results vs. Consensus & FY25 Summary

Q4 Scorecard

FY25 Full Year vs FY24

Quality-of-Beat Callout

FY25 Composition

The FY25 print should be read in three layers:

1. Operational layer (BCA, BDS, BGS execution): 600 deliveries; 1,173 orders; backlogs at records; held EACs for the year on BDS development tail (the KC-46 charge was production-support, not development-program execution).
2. Strategic layer (transactions): Spirit closed; Jeppesen sold; F-47 won; IAM contract ratified. The company restructured around the recovery while monetizing a $10B non-core asset to strengthen the balance sheet.
3. Financial layer (cash, capital structure): Q3 + Q4 both positive FCF (first consecutive positive quarters since 2020). FY26 guide explicitly positive. $10B target re-anchored.

Segment / Program Detail

BCA — 600 Deliveries, $567B Backlog, Spirit Closed

737 — 42/mo Achieved, On Course for 47

737 delivered 117 aircraft in Q4 and 447 for the year, in line with expectations. The factory increased the production rate to 42/mo in Q4 (achieved the effective rate in November / December despite holiday months). Per Ortberg: "We are, as we speak, rolling at the 42 rate." On-time delivery performance improved threefold compared with the previous year. 5,100+ work instructions simplified during 2025.

The 47/mo target is the next gate. Plan: Boeing stabilizes at 42 through Q1 / early Q2 2026; demonstrates KPIs; requests FAA approval; transitions to 47 in mid-2026. Above 47 requires the Everett North Line (already complete on facility and tooling; hiring and training underway). Above 52 requires supply chain alignment beyond the inventory buffer.

FY26 737 delivery target: ~500 aircraft (vs FY25 447). About 30 of these will be 737-10s built but not delivered (awaiting cert; delivery in 2027).

787 — At Rate 8, Targeting 10

787 delivered 27 aircraft in Q4 and 88 for the year. Successful Capstone review for rate 8 completed in Q4. Rework hours reduced 30% over FY25. Charleston expansion factory groundbreaking — supports rates into the teens long-term. FY25 787 net orders: 395 — highest annual total in program history.

FY26 delivery target: 90–100 aircraft (vs FY25 88). About 20 came out of inventory in FY25; FY26 will be primarily production rollouts.

777X — TIA 3 Approved, Engine Durability Issue Emerged

Q4 saw the 777-9 receive TIA 3 approval — a major phase of testing focused on avionics, environmental control systems, and APU. Certification flight testing continues. 202 777X net orders in FY25 (second-highest annual total since program launch).

The new wrinkle: Boeing identified a "potential durability issue" on the 777X engine during a recent inspection. Working with GE to root-cause and identify corrective action. Critically, "we don't expect this to impact our delivery in 2027." The certification flight testing continues during the GE work.

Assessment: TIA 3 approval is the operational positive. The engine durability issue is a new finding that could become a real problem if it cascades, but management's confidence that it won't impact the 2027 delivery is meaningful. We model the 2027 first delivery as central case; ascribe a modest residual probability (15%) of further slippage.

737-7 / -10 — TIA 2 Achieved on -10

737-10 received TIA 2 in Q4, expanding flight testing to validate avionics, propulsion, auto-flight, and other functions. Engine anti-ice solution design finalized. Both 737-7 and -10 still anticipated for cert in 2026.

Spirit AeroSystems — Closed in Q4

Spirit acquisition completed in Q4. Bringing 737 and 787 fuselage production back inside Boeing reinforces safety and quality across factories. The Spirit operations are currently dilutive: ~1.5pp negative impact on Q4 BCA margin from absorption of unprofitable Spirit operations. FY26 dilution ~$1B in FCF; FY27 similar; thereafter productivity + synergies + pricing benefits begin.

Per Ortberg on the integration: "There's a lot of work ahead of us with an integration of this magnitude, and we have thoughtful, detailed plans in place."

BDS — Held EACs (Mostly), Record Backlog $85B

The Q4 BDS print includes the $565M KC-46 charge driven by higher BCA production support + supply chain (Spirit) + Everett shared overhead allocation (from the 777X update). Production support investments are needed to maintain higher quality and engineering support; while these investments are starting to evidence progress (Q4 rework levels down 20% vs H1), they need to be sustained.

BDS booked 15 KC-46As from USAF + 96 Apaches from Poland in Q4. F-47 win earlier in 2025 supports multi-year revenue ramp. PAC-3 production +33% over FY25. T-7A program achieved 4 customer milestones + delivered first operational aircraft. MQ-25 inaugural engine run completed. 5-year IAM Saint Louis contract ratified.

Assessment: The KC-46 charge is a real negative but does NOT represent a new fixed-price development program failure — it's a production support cost recognition driven by absorbing Spirit + 777X shared overhead. The structural BDS turn is intact: T-7A, MQ-25, Starliner, classified all held EACs through the year. The path to high-single-digit BDS margins remains 2027-2028 target. F-47 + $150B FY29 defense plus-up provide multi-year top-line growth.

BGS — Record Backlog, Jeppesen Sold

BGS adjusted (ex-DAS) revenue +6% Q4 / +5% FY; commercial + government both delivered double-digit margins. C-17 modernization contract awarded in Q4. New unified e-commerce platform launched. Boeing's largest-ever commercial component service deal secured.

Jeppesen / Digital Aviation Solutions divestiture completed Q4 for ~$10.6B proceeds. This was the textbook portfolio rationalization — sell the high-multiple, non-core asset; keep the strategically essential digital capabilities (fleet maintenance, operations, repair). The $11.83 per-share gain in Q4 EPS is non-recurring.

Assessment: BGS continues to be the underappreciated cash compounder. Record backlog + 18% margin + 5% organic growth + capital-light business model = the SOTP value driver. We'd value BGS standalone at $60–80B EV.

FY26 Guide — The Inflection Year

FCF cadence: Q1 2026 will be a use of cash similar to Q1 2025 (~$2B+ usage) driven by normal seasonality. Q2 2026 outflow but smaller. H2 2026 turns positive and accelerates sequentially. The full-year +$1–3B implies very robust H2 FCF — likely $4–6B positive in H2 alone.

The "$10B is very attainable" framework: Adjusting FY26 +$1–3B FCF for the temporary drags (~$2B 777X + ~$1B Spirit + ~$1B BDS legacy charge run-off + ~$0.7B DOJ) yields ~$6–7B underlying FCF. Add the multi-year deliveries growth (52/mo 737 + 10/mo 787 + 5/mo 777X), the BDS margin expansion to high-single-digit, and continued BGS compounding, and the $10B framework is visible by 2028–2029.

Assessment: The FY26 guide and the "$10B very attainable" framing are the key analytical anchors for the rerate. We model FY26 FCF at $2B (midpoint), FY27 at $5–6B, FY28 at $8–9B. The acceleration is back-end loaded but visible.

Key Topics & Management Commentary

1. The $10B FCF Re-Anchored — "Very Attainable"

"We continue to believe the $10 billion free cash flow mark is very attainable, including impacts of the Spirit acquisition, which aligns with my remarks last month."
— Jay Malave, CFO

"I'm very comfortable with our ability to achieve $10 billion. Again, you know, it's a little bit of a repeatable sequence of events, but we have to get through the certification programs. Have to ramp up on our BCA production rates. Need to see the improving performance at BDS related to our margin profile as well as burning off the prior charges and then continued performance at BGS. … So if you're asking me, can we be above 10? I think the potential of our cash flow app supports being above 10. But first things first, let's get to 10, and we'll talk about how we go from there."
— Jay Malave, CFO

Assessment: Malave's "very attainable" + "potential supports above 10" is a stronger framing than his cautious Q3 deferral. The new CFO has now had 6+ months to assess and is endorsing the long-term framework. We treat this as the institutional anchor for the rerate.

2. FY26 FCF Build — $1–3B Walk

"As we continue turning the corner in 2026, we expect positive free cash flow of $1 billion to $3 billion, aligned with the expectations I shared last month. … cash flow is expected to grow year over year, primarily on higher commercial deliveries, better performance at BDS as that business continues to stabilize, and continued steady growth at BGS. … Within 2026, we expect first-quarter free cash flow will be a usage similar to 2025, driven by normal seasonality. We expect 2026 to be a use of cash, with the second half turning positive and accelerating sequentially."
— Jay Malave, CFO

Assessment: The +$1–3B guide is the inflection moment. The H2 acceleration framing implies $4–6B+ in H2 alone — a very meaningful exit-rate going into FY27.

3. Spirit AeroSystems — Closed, with $1B FY26 Headwind

Spirit closed in Q4 for ~$4B+ equity consideration and assumption of Spirit debt. The integration brings 737 + 787 fuselage operations back inside Boeing. FY26 FCF headwind ~$1B (operating performance + CapEx); FY27 similar; thereafter productivity + synergies + pricing benefits.

"We don't believe that over time, that's going to materially impact what we believe and what we need to deliver on these types of cash flows. So over time, Spirit's performance will get better. That'll be reflected in the financials through just productivity, through synergies. And higher quality and delivery performance, as Kelly mentioned. We do have what we would expect over that time period as well is a boost from pricing."
— Jay Malave, CFO

Assessment: Spirit re-integration is the strategically correct move; the financial drag is well-quantified at $1B FY26 and manageable. Over 3+ years, Spirit becomes accretive through productivity + quality + pricing.

4. Jeppesen / Digital Aviation Solutions Divestiture — Textbook Capital Allocation

$10.6B in proceeds from selling Jeppesen + portions of digital aviation solutions to Thoma Bravo. Boeing retains essential digital capabilities (fleet maintenance, operations, repair). The Q4 +$11.83 EPS gain is one-time. Net debt down $3B in Q4 from Spirit-related debt paydown.

Assessment: Exemplary portfolio rationalization. Monetizing a non-core asset at a peak multiple while keeping strategic capabilities is the textbook playbook. Strengthens balance sheet during the recovery phase.

5. 737 Path to 52 — "What's the Cadence?"

"Just to give you a little bit of color, actually gone really well. The KPIs look really good. We achieved that effective rate in November and December on the 737 line. … Supply chain on that ramp, not a big issue for us right now. And we projected that. As you know, we've got a lot of inventory there. And I actually don't think supply chain is going to be a big challenge for us in the next rate ramp from 42 to 47. But that's where we start to normalize with the supply base in terms of burning off the excess inventory. … going from 47 then to 52, that will be where we'll have to see improved performance from the supply chain."
— Robert Ortberg, CEO

Path: 42 → 47 mid-2026 (supply chain inventory-buffered) → 52 with Everett North Line + supply chain alignment (late 2026 / early 2027). Above 52 is FY28+ territory.

6. 777X — TIA 3 + Engine Durability Issue

777-9 received TIA 3 in Q4 — major flight testing phase. Engine durability issue identified during inspection; GE working on root cause and modification. Boeing confident the issue doesn't impact 2027 delivery timing.

Assessment: The TIA 3 progress validates the post-charge rebaseline. The engine durability issue is a new but apparently contained finding. We model 2027 first delivery as base case; residual 15% probability of further slippage.

7. F-47 + Defense Budget Plus-Up

F-47 win supports multi-year revenue. KC-46 #100 delivered. PAC-3 +33% production growth. $150B FY29 reconciliation defense plus-up benefits F-15EX, MQ-25, E-7, PAC-3, classified programs. New tanker contract beyond current program of record is sole-source.

Assessment: Structural multi-year tailwind. Defense is now the steady positive contributor to the recovery.

8. KC-46 Charge — Production Support, Not Development

"The charge we took on the tanker in this quarter doesn't really reflect at all on any of the other BDS programs. It's a discrete charge against that particular program. And in fact, the predominance of the charge is increased cost on the actual 767 commercial airplane production, as Jay outlined."
— Robert Ortberg, CEO

The $565M charge is concentrated in higher 767 production support cost, supply chain (Spirit), and Everett allocation — not in T-7A, MQ-25, Starliner, or other fixed-price development programs.

Assessment: The charge structure tells us the structural BDS turn is intact. The KC-46 program is a long-running fixed-price commercial-derivative program — these production-support adjustments are different from the development-charge cycle that bled BDS for years.

9. 737 Delivery Target ~500 in FY26

FY26 target: 500 737 deliveries (vs 447 FY25). Of these, ~30 will be 737-10s built but not delivered (awaiting cert; delivery in 2027). Production rollout target: ~530 aircraft built in FY26.

10. Spirit Acquisition + Industry Profitability

"It's an effective duopoly with you guys in Airbus. … it just seems like building airplanes isn't that profitable. … Can that change? And, like, on a future airplane, can that change?"
— Ron Epstein, Bank of America

"I think the fundamental is we have to get a handle on what risks we're taking. And understand the risks. … The issue that I think we've got to improve upon is how we manage ourselves through those risks and how we enter into contracts associated with knowing that we've got these risks out there. So concurrency, how we price things, what damages we accept, how we do that, I think are all opportunities for us to improve. And I think a new airplane program gives us that opportunity."
— Robert Ortberg, CEO

Assessment: The "where is the value chain" framing for the next airplane program is strategically the right question. Boeing has historically priced and contracted as if it didn't carry the program risk; the new generation should price and contract accordingly. This is multi-year strategic positioning.

11. Investment-Grade Rating + Capital Allocation

Cash + securities $29.4B (after Spirit + Jeppesen). Debt $54.1B. Investment-grade rating intact. No buyback or dividend reinstatement near-term. FY26 capex ~$4B.

Assessment: Conservative capital posture remains correct given the recovery stage. We don't expect shareholder return reinstatement until FY27 at earliest.

Analyst Q&A

FY26 cash bridge — quantum of $6–7B in adjustments

Q: "Could you just clarify the excess advances in customer considerations, the quantum of those, and then the duration by which they normalize? Is that 2027, 2028, or further out?"
— Myles Walton, Wolfe Research

A: "Again, the total overall quantum goes from low single-digit to high single-digit. … the excess advances coming in from 25 to 26 as well as the considerations at least in 2026. They're generally close to each other, so almost the same impacts. The excess advances over time actually will burn down quicker than what we expect on the consideration. So that will take a little bit longer to burn down on the 737 and 787. Considerations. … Burning this down all is about the production rates and getting us to the higher production rates over time. … even though you didn't ask me, you know, I colored that as well. Again, that'll take us a few years. The key thing there is while it is a higher cash burn this year, it'll improve over time with it turning positive in 2029."
— Jay Malave, CFO

$10B framework — endorsing and beyond

Q: "The $10 billion number, Jay, that's not one that you created. … if high single-digit is, like, an adjusted starting point at the end of '26, with the benefit of substantially higher production rates that the FAA allows. It stands to reason that the normalized free cash flow figures out could be much higher, many billions higher than $10 billion."
— John Godin, Citi

A: "Well, let me just start by saying first things first. And the first order of business is getting ourselves to this $10 billion, which I believe we are absolutely on the right track. You're right, John. I mentioned the term I actually used was very attainable in December, and I'm repeating that again today. I went through this, you know, in the fourth quarter, and I'm very comfortable with our ability to achieve $10 billion. … if you're asking me, can we be above 10? I think the potential of our cash flow app supports being above 10. But first things first, let's get to 10, and we'll talk about how we go from there."
— Jay Malave, CFO

737 47 / 52 path — Spirit's role

Q: "When you look at the production ramps that you're focused on, I'd like to understand a little bit more about where you see the bottlenecks when you're going to 47 to 52 on 737 when you're getting to ten, and then they'll to twelve and fourteen. … perhaps you could also address what you may be doing to ensure you don't have those kinds of issues again with Spirit."
— Doug Harned, Bernstein

A: "Let's start with the 737 MAX program. … We achieved that effective rate in November and December on the 737 line. … Supply chain on that ramp, not a big issue for us right now. … going from 47 then to 52, that will be where we'll have to see improved performance from the supply chain. … You mentioned Spirit, so I'll address that right now. You're right. In that Spirit, we're going to need to continue to invest in the capacity growth from Spirit. … if they had continued in a distressed environment, I think that risk would have been significantly higher than our ability to go manage that. But that, like the rest of the supply chain, moving to that rate, Spirit has some work to do, and we've got a plan to go accomplish that."
— Robert Ortberg, CEO

BCA margins + Spirit impact

Q: "Maybe if we could just talk about the momentum in Renton is very clear. How do we think about BCA margins? Jay, you mentioned Spirit is about $1 billion and the comment about delays not affecting pricing going forward potentially as much. And the $10 billion future free cash flow state. So I guess, do we think about 737 and 787 cash margins in the near term?"
— Sheila Kahyaoglu, Jefferies

A: "Right now, 737 and 787 cash margins are depressed, and that's reflected in our free cash flow. We do assume and expect, given what's in the backlog, that those will improve over time to support these cash flow types of numbers that we're talking about. The Spirit impact itself, in terms of the cash flow impact of $1 billion negative this year. And we've looked at that, and we've played out their impact and their contribution to our cash margins in 737 and 787 program. And forecasted that out. And we don't believe that over time, that's going to materially impact what we believe and what we need to deliver on these types of cash flows."
— Jay Malave, CFO

FY26 BCA delivery expectations

Q: "The BCA team had a really strong delivery year in '25. I think you mentioned 447 MAXs, and you had 88 787 deliveries. And with the rate breaks that we're seeing this year, maybe you could just level set us on kind of 2026 delivery expectations for both the MAX and the 787 programs."
— Peter Arment, Baird

A: "So let me start with the 737. Our expectation for deliveries on that program is around 500 aircraft. … When you do the math, as you indicated, Peter, in terms of just taking a look at the assumption for rate breaks, might get into around, call it, 530 aircraft or so. What we're going to be doing in this production build is building around 30 aircraft on a 737-10. Those will not be delivered in 2026. Be delivered in 2027. Upon certification. … As far as the 787, a little bit simpler there. We're expecting around anywhere between 90 to 100 aircraft. … Overall, we expect BCA deliveries to be up close to approximately 10%. All in."
— Jay Malave, CFO

KC-46 charge + BDS multi-year structure

Q: "We saw a charge there for the first time in 2025. But it sounds like it's something that can, perhaps help in the future. Maybe you could talk a little bit about how KC-46, to the extent that you see it turning the corner, how is it turning the corner? And then, you know, moving beyond that, the state of BDS and maybe how you prepare for some of these production increases that the Defense Department is looking for. Should we think about a multiyear contract for Boeing on PAC-3 seekers and how do we think about the investment associated with that?"
— Seth Seifman, JPMorgan

A: "First of all, let me just say that the charge we took on the tanker in this quarter doesn't really reflect at all on any of the other BDS programs. It's a discrete charge against that particular program. … We delivered 14 tankers in 2025, and we are planning to deliver nineteen in 2026. … the Air Force has made a decision to go sole source for the follow-on tanker contracts. We will be pricing that in the fall time frame according to the current schedule. … as I look at the broader question about increasing in rate or increasing an investment from the executive order and the Department of War. Look. We've invested ahead of contract on F-47. … I suspect we will get to a multiyear similar to what you've seen elsewhere with the government on the PAC-3 contracts."
— Robert Ortberg, CEO

Industry profitability question — what changes

Q: "Yes, can that change? And, like, on a future airplane, can that change? Like, what has to change to, like, really make this industry shine?"
— Ron Epstein, Bank of America

A: "I think the fundamental is we have to get a handle on what risks we're taking. … building an airplane is not an easy task. There's significant risk, and we'll continue to take the risk. The issue that I think we've got to improve upon is how we manage ourselves through those risks and how we enter into contracts associated with knowing that we've got these risks out there. So concurrency, how we price things, what damages we accept, how we do that, I think are all opportunities for us to improve. And I think a new airplane program gives us that opportunity. For the most part, there's not much we can do about what we've got at hand. Other than fix our performance, and that's what we're doing, day in, day out."
— Robert Ortberg, CEO

Tariff / geopolitical risk + European procurement shift

Q: "Given the recent geopolitical volatility, are you worried about a return of tariff risk at BCA this year? And similarly, on the defense side of the business, a longer-term shift in Europe to more local procurement."
— Robert Stallard, Vertical Research

A: "I wouldn't say worried. It's something we have to continue to watch as we saw last year. This is super dynamic. … at least the US fully understands the importance of commercial aerospace to the economy. … this administration is fully supportive of this industry. It's not going to do things that, you know, that cause us major harm. … We do have about the same number of deliveries this year into China as we had last year. So, you know, we gotta watch these trade barriers. Certainly, we have a lot of deliveries into Europe. So watching how, you know, that whole negotiation plays out to assure that, you know, we don't get in a tit-for-tat environment on commercial airplanes."
— Robert Ortberg, CEO

BDS — Malave's review depth

Q: "Jay, I think you're restricted from looking at all of BDS previously. So have you been able to get under the hood of all those programs at this point?"
— Gavin Parsons, UBS

A: "I started here in January doing reviews with BDS. … I think there's some expectation that I'm doing some kind of an outside-the-process EAC kind of deep dives that it kind of circumvents processes that we have already in place. And I'm not doing that. What I am doing is really reviews with our programs as well as my first reviews where we're just with the BDS business in the aggregate. And it's really focused on three things. One is there's just a strategic element to it. One is an operational element, and then third is a financial element. … the team is doing a great job."
— Jay Malave, CFO

What They're Not Saying

• Specific multi-year FCF framework with year attribution. Malave commits to "$10B very attainable" but does not name the year. We model 2028-2029.
• No mention of Air India AAIB findings. The June 2025 crash investigation continues; no formal update during Q4 call.
• No buyback or dividend reinstatement signal. Capital allocation remains balance-sheet-repair focused.
• Limited Starliner program discussion. NASA-related risk continues; silence remains the operating posture.
• No quantification of pricing increases in new orders. Malave referenced "boost from pricing" in out-years but no specific framework.
• No formal investor day timing. A formal multi-year framework presentation would be the next anchor — we expect spring 2026 at earliest.

Market Reaction

• Pre-print (Jan 26 close): ~$210. Stock had drifted lower since Q3 print on 777X concerns + general industrial-sector compression + January macro volatility.
• Day-of (Jan 27): Print landed pre-market. Strong reception: stock opened +5% on the +$1–3B FY26 FCF guide + FY25 600 deliveries + $10B target endorsement. Held gains through the call. Closed ~$222 (+5.7%).
• Volume: ~15M shares (~1.8x 30-day average) — strong conviction flow.
• Peers (day-of): Airbus −0.3%; defense primes mostly up; aero suppliers (HXL, HEI, TDG, MOG.A) up 1–2%.
• Sell-side flow: Multiple PT raises into the $260–$320 range; some upgrades from Hold to Buy.

Interpretive read: The market processed Q4 / FY25 as the structural inflection moment. The +5.7% session reaction is the largest single-day post-earnings gain in 18+ months. Stock at ~$222 is the bottom of our newly-raised $250–$320 range — the upgrade is supported by the positive setup. The next 12–18 months should deliver: H2 2026 positive FCF acceleration; 47/mo 737; rate 10/mo 787; possible 777X first delivery in late 2027; BDS margin expansion. Each milestone supports the rerate path.

Street Perspective

Debate 1: Is FY26 +$1–3B FCF guide low or high?

Bull view: The guide is conservatively framed. H2 acceleration implies $4–6B+ in H2 alone — exit-rate run-rate of $8–10B annualized going into FY27. The drags (Spirit, 777X, DOJ, BDS) total $4B+ which gets normalized over time. Underlying FY26 ex-drag is $6–7B FCF. Conservative.

Bear view: The $1–3B range is wide; the low end ($1B) is concerning given delivery and rate ramp assumptions. Any one of (a) 737 rate delay beyond 47 in mid-2026, (b) further 777X slippage, (c) Spirit deeper drag, (d) new defense charges could push FY26 to flat or even negative.

Our take: We model FY26 at $2B (midpoint), but the H2 acceleration framing supports upside to $2.5–3B. The risk is asymmetric to the downside ($0.5B range possible) but the upside is more likely given the FY25 over-delivery pattern.

Debate 2: How fast can BCA margins turn positive?

Bull view: Per Malave, "margins to turn positive mid next year" (mid-2027). With pricing tailwind in out-year backlog + Spirit synergies + scale at 52/mo, BCA margins expand to high-single-digit by 2028. Standalone BCA value re-rates from current implied negative to $80–100B EV.

Bear view: BCA margins recover slowly. Spirit integration drag in 2026-2027 + 777X carrying cost + 737-10 production-but-no-delivery in 2026 + cumulative customer considerations create a stickier negative-margin period than "mid-2027" implies. Could be 2028+ before sustained positive.

Our take: Mid-2027 positive BCA margin is plausible but back-end loaded; we underwrite Q4 2027 first sustained positive quarter. FY28 positive low-single-digit; FY29+ mid-single-digit. The path is multi-year and depends on rate progression.

Debate 3: Should the $10B framework be the ceiling or the floor?

Bull view: At 52/mo 737 + 12/mo 787 + 5/mo 777X + BDS at HSD margin + BGS at 18% margin compounding, the math supports $12–15B FCF in 2029-2030. $10B is a floor, not a ceiling. Add in capital return (buyback + dividend reinstatement post-2028), and the equity value math gets very interesting.

Bear view: Even at $10B FCF in 2028-2029, the path includes execution risk. Above $10B requires multiple positive surprises (rate above 52, Spirit synergies bigger than modeled, defense plus-up flow-through). The $10B is a reasonable framework, not a floor.

Our take: We model $8–10B FCF in 2028 base case; $10–12B in 2029-2030 if rate progression continues; $12–15B is upside but requires multi-cycle positive outcomes. The $10B framework supports our $250–$320 fair value range; the upside above $10B drives the bullish case to $350+.

Model Implications & Thesis Scorecard

Model Update

• FY26 FCF: $2B (midpoint). H2 weighted: ~$1B usage H1; ~$3B positive H2.
• FY26 EPS: $1–2 core. BCA approaching breakeven; BDS positive 2–3%; BGS 18%.
• FY26 BCA deliveries: 660+ (737 ~500; 787 90–100; 777 ~30).
• FY27 FCF: $5–6B. BCA mid-year margin positive.
• FY28 FCF: $8–9B. 52/mo 737 + 10/mo 787; BDS HSD margin.
• FY29 FCF: $10B+ ($10B framework attained).
• Fair value range: $250–$320 (raised from $200–$255). Stock at $222 = ~12x FY28E FCF/share.

Thesis Scorecard

Rating & Action

Upgrading to Outperform from Hold. The Q4 / FY25 print is the structural inflection moment for the Boeing recovery thesis. FY25 delivered: 600 deliveries (highest since 2018); record $686B aggregate backlog; first two consecutive positive FCF quarters since 2020; Spirit re-integration; Jeppesen divestiture; F-47 win; IAM contract ratification; held EACs on BDS development programs. The FY26 guide of $1–3B positive FCF is the first positive cash year since 2018, and the path to $10B FCF over 3–4 years is now visible and CFO-endorsed. The risk-reward at ~$222 (10x FY28E FCF/share) with credible path to ~$300 over 18–24 months is attractive. We do not go to highest conviction Outperform because (a) the 777X engine durability issue is a new finding to monitor, (b) Spirit integration carries execution risk, (c) 737 rate progression past 47 depends on supply chain readiness. But the central thesis is now well-supported.

Fair value range: $250–$320 (raised from $200–$255). Stock at ~$222 is below the bottom of our new range — reflecting opportunity. We re-evaluate further up on (a) FY26 H2 FCF acceleration delivered as guided, (b) 47/mo 737 in mid-2026, (c) 777X TIA 4 progress on schedule, (d) BDS H2 2026 margin expansion. We re-evaluate down to Hold on (a) Spirit integration deeper drag than $1B, (b) further 777X slippage, (c) FAA rate-break approval delay past mid-2026.

Key watch items into Q1 2026 (April):

• Q1 2026 FCF — magnitude of seasonal usage.
• 737 rate stability at 42 — KPI evolution toward 47 approval request.
• 777X TIA 4 progress — next certification milestone; engine durability issue resolution.
• Spirit integration progress — operational metrics + FY26 margin trajectory.
• BDS Q1 margin — sustained held EAC pattern.
• FY26 guide re-confirmation.
• Air India AAIB preliminary findings.
• Tariff / trade volatility (Trump-administration dynamics).