Clean Quarter, Revenue $22.2B (+14%), 143 Deliveries, 737 Stable at 42/Mo, BDS Op Margin 3.1% (Fifth Quarter Held EACs), Record $576B BCA Backlog, FY26 FCF Guide $1–$3B Reiterated — Maintaining Outperform

Coverage Update from Q4

We upgraded to Outperform at the January Q4 print at ~$222 with a $250–$320 fair value range. Since then BA stock has drifted to ~$200 (−10%) on broader market weakness in industrials + investor concern about (a) Iran-Israel regional conflict spillover to commercial aviation, (b) 737 wiring nonconformance issue in February, (c) general macro uncertainty. The Q1 print confirms that the recovery is intact: revenue grew +14%, FCF outperformed Q1 guide, BDS delivered a fifth held-EAC quarter, the 737 wiring issue was resolved without affecting FY guide, and the 777X program received TIA 4a. We re-confirm Outperform. The market dislocation creates better entry levels relative to the fundamental trajectory.

Results vs. Consensus

Q1 Scorecard

Year-over-Year & Q4-to-Q1 Comparison

Quality-of-Beat Callout

Revenue / Margin / Cash Assessment

Revenue +14% to $22.2B was driven by all three segments. The Spirit acquisition impact (added ~$150M to BDS Q1) was largely offset by the DAS divestiture (removed similar amount from BGS commercial digital revenue). Underlying organic growth ~14% — consistent with the 10%+ delivery growth + defense growth + services growth blend.

BCA op margin −6.1% includes a favorable accounting adjustment (one-time benefit); ex-the benefit, BCA margin is closer to −7%, still better than Q4's −5.6% partly because Q4 had Spirit one-time impact and Q1 has the full Spirit dilution flowing. The path to BCA margin positive remains mid-2027 per Malave: "We expect the margins to turn positive mid next year." BCA progressive improvement sequentially through the rest of FY26 and into FY27.

BDS op margin +3.1% is the standout. Fifth consecutive quarter of held EACs (Q1 25 → Q1 26). Per Malave: "Q1 could be the low watermark for the BDS margin for the year. I think for the year, it could be a little bit better, kind of think about 3.5% for the year. So I would slight better from here on out." The path to high-single-digit BDS margin is now a multi-quarter sequential progression rather than a "wait for the development tail to clear" story.

BGS op margin 18.1% reflects the DAS divestiture impact (lower than FY25's 18.6%) and less favorable mix; commercial + government both at double-digit margins. EVA Air and Singapore Airlines (largest Landing Gear Exchange contract in Boeing history) wins indicate aftermarket momentum continues.

FCF use of $1.5B is meaningfully better than the $2B+ Q1 seasonal usage expected. Drivers: 737 wiring resolution (all 25 affected aircraft reworked and most delivered before quarter-end); favorable collection timing late in quarter; pulled-forward customer payments. Q2 expected to be a slight outflow; H2 turns positive with sequential acceleration. $6.9B in debt paydown — debt down to $47.2B from $54.1B in Q4. With $1.4B of debt maturities left in FY26, debt should approach $46B by year-end. This is the cleanest demonstration of the multi-year balance-sheet repair.

Segment / Program Detail

BCA — 143 Deliveries, $576B Record Backlog, 737 at 42 Stable

737 — Stable at 42, Targeting 47 This Summer

114 737 deliveries Q1 — included the final shadow factory 737 built prior to 2023 (the inventory liquidation that has been a delivery tailwind is now complete). Production stabilized at 42/mo. 20% reduction in final assembly rework hours vs Q1 2025.

Wiring nonconformance event: Late in Q1, Boeing identified a wiring nonconformance issue affecting 25 aircraft. All 25 reworked; most already delivered by quarter-end. This shifted some Q1 deliveries to Q2 but did NOT affect the FY delivery target of ~500 aircraft. Per Ortberg: "This is evidence of our safety management system working to identify issues early and drive continuous improvement and avoid these issues in the future."

Path to 47/mo this summer. Boeing exits Q1 stable at 42; FAA approval for 47 expected this summer. Buffer inventory will support the 42 → 47 transition. The Everett "North Line" (Boeing's fourth 737 production line) is being readied — construction complete, tooling in place; hiring and training of mechanics underway. North Line will begin operations later this year at "low rate of initial production to demonstrate conformity to the FAA that will allow operations under our current production certificate." Following completion of these initial units, rate steps to 52 — pending KPI readiness across the entire production system.

Assessment: The 42/mo stability is now well-validated. The 47 transition this summer is on schedule per the framework. The North Line operational ramp through H2 2026 enables the 52 step in early 2027. The wiring issue resolution demonstrates the safety-management system working operationally — Boeing identifying the issue internally + reworking + redelivering within a quarter is the textbook process. Net: 737 program is now executing predictably.

787 — Stable at 8, Targeting 10

15 787 deliveries Q1 — impacted by seat-cert delays. FY26 delivery target of 90–100 maintained. Charleston factory performing well at 8/mo; rework hours improved 25% vs Q1 2025. Supply chain (engines + interiors) pacing constraint vs the 737's inventory buffer. Boeing forward-deploying resources to supplier recovery plans.

Critical seat-cert dynamic: "It has less impact on our factory production because we can essentially build the airplanes, it's that we can't deliver them." Boeing has a fair number of built but undelivered 787s pending seat certifications. Working with FAA + customers to address by partnering earlier in the development process and creating contractual off-ramps to avoid future delays.

FAA certified increased maximum takeoff weight for 787-9 and 787-10, enabling those models to fly further or carry more cargo — value-add opportunity for operators.

Assessment: 787 is the "slower-moving but compounding" half of the BCA story. The path to rate 10 later this year + the Charleston expansion supporting rates into the teens long-term is intact. Seat-cert delays are a recurring industry friction (not specific to Boeing's process) but a real near-term delivery constraint.

777X — TIA 4a Approved, Engine Solution Maturing, 2027 Intact

Q1 saw TIA 4a approval — a smaller package focused on natural ice testing, but operationally important because it allows Boeing to leverage Alaska's ice season. TIA 4b expected soon (larger package).

On the engine durability issue identified in Q4: "Since then, we worked closely with our supplier. As they've said yesterday, they believe they have identified root cause and they're working on finalizing their modification. We are working together with the supplier and the FAA to fold this into our certification plan, and we remain on track for schedule of first delivery in 2027." GE will require an update to the engines before delivery; Boeing working through the industrial plan.

Q1 successfully completed flight testing associated with handling qualities, lighting, stability, and control.

Change-incorporation work for ~30 built airplanes is underway over several years.

Assessment: 777X is executing on the post-Q3-charge cadence. TIA 4a + GE engine solution identified + flight test progress = all supportive of the 2027 first delivery commitment. We continue to ascribe a modest tail probability (15%) of further slippage, but the Q1 data points reduce this from the Q3 baseline.

737-7 / -10 Certification

Q1 began the final phase of certification flight test for 737-10, including autothrottle, autopilot, enhanced Angle of Attack, and engine anti-ice solution. Cert remains targeted for later this year with deliveries starting in 2027.

BDS — Fifth Consecutive Quarter of Held EACs; Op Margin 3.1%

BDS revenue +21% driven primarily by KC-46 tanker, missiles and weapons, and classified programs. Spirit contributed ~$150M of Q1 BDS revenue (primarily defense-related Spirit operations now consolidated). Op margin +3.1% (+60bp YoY) reflects improving operational performance — the fifth consecutive quarter of held EACs.

Per Malave on his BDS reviews: "I have come away impressed with the teams leading these programs. I've also generally found reasonable assumptions in our EACs. They're not without risk and many assume improvements in front of us, but the estimates have a solid basis. On many of these legacy-challenged programs, the teams have made excellent progress in retiring risk and moving these programs forward."

Key program milestones in Q1:

• KC-46 tanker: Best-ever factory performance going back to pre-pandemic levels of productivity. On track this year to deliver the most tanker aircraft since 2019.
• MQ-25 Stingray: High-speed taxi tests complete; first flight imminent. First unmanned aerial refueler for U.S. Navy.
• PAC-3 seeker: Framework agreement with Department of War to expand production in Huntsville factory. Multi-year ramp underway.
• Artemis II: NASA astronauts launched on Boeing-built core stage rocket.
• F-47: 6th-gen fighter program ramping with $5B in budget for FY26.

Path to high-single-digit BDS margin remains 2027-2028. Per Malave: "Q1 could be the low watermark for the BDS margin for the year. I think for the year, it could be a little bit better, kind of think about 3.5% for the year." This implies progressive sequential improvement through FY26.

Assessment: BDS is now the steady positive contributor we wrote about at upgrade. Five consecutive quarters of held EACs combined with KC-46 production efficiency improvements + multiple development-program milestones + defense-budget-tailwind backlog ($86B record) = the structural turn is in progress. FY26 target of 3.5%+ op margin with progressive H2 acceleration sets up FY27 at 5%+ margin and FY28 at high-single-digit.

BGS — Record $33B Backlog, Singapore Landing Gear Win

BGS adjusted revenue +13% ex-DAS divestiture. Op margin 18.1% — down from FY25 due to DAS divestiture impact + less favorable mix; both commercial and government deliver double-digit margins. 777-9 training devices received FAA + EASA qualification — supporting 777X entry into service next year.

Q1 wins:

• Singapore Airlines Landing Gear Exchange contract — largest in Boeing's history; covers 75+ aircraft across Singapore's 737 MAX and 787 fleets.
• Boeing Defense U.K. largest-ever maintenance and support contract for U.K.'s rotary wing enterprise.
• AI / automation initiatives reduced proposal cycle time by 25% YTD.

Assessment: BGS continues to compound. $33B backlog (record) + 1.6 book-to-bill = multi-year revenue visibility. The DAS divestiture impact normalizes through 2026 as the company laps the divested base.

FY26 Guide — Reiterated

FY26 guide unchanged from January:

• Free cash flow: +$1B to +$3B positive
• Q2 2026 expected to be slight cash outflow (in "low hundreds of millions" range) — improvement from Q1's $1.5B usage
• H2 turns positive with sequential acceleration
• DOJ payment shifted to H2 (vs Q1 expectation)
• BDS op margin ~3.5% for FY26 (implies sequential acceleration)
• BCA margin progressive improvement; turning positive mid-2027

Iran-Israel regional conflict: Boeing has not seen any requests for delivery deferrals; 4 aircraft delivered to Middle East customers in Q1 since conflict began. ~14% of unit backlog is in Middle East customers, but 2/3 of that delivers in 2030+. Higher defense op-tempo a positive for BDS aftermarket — likely offsets any potential commercial MRO weakness from higher fuel prices.

$10B FCF framework: "We continue to view the $10 billion free cash flow figure as very attainable with significant growth beyond that into the next decade."

Key Topics & Management Commentary

1. The 737 Wiring Nonconformance — Safety Management Working

"As previously discussed, some first quarter 737 deliveries slid into the second quarter due to a recent nonconformance finding on aircraft wiring. As part of our root cause corrective action process, we fully understand the issue, and we have reworked all of the 25 airplanes affected and most of these have already been delivered. Importantly, this is evidence of our safety management system working to identify issues early and drive continuous improvement and avoid these issues in the future. To be clear, the wiring issue will not affect our full year delivery goals or plans to increase production to 47 per month this summer."
— Robert Ortberg, CEO

Assessment: The handling of the wiring issue is the cleanest demonstration of the new Boeing safety-management system in action. Find issue → quarantine impacted aircraft → rework within a quarter → redeliver. Operationally exemplary, and reinforces the regulatory trust that supports rate progression.

2. 47/mo Path — This Summer

"The 737 program has stabilized at a rate of 42 airplanes per month. … In the quarter, production stabilized at a rate of 42 per month, and the team drove a nearly 20% reduction in final assembly rework hours as compared to the first quarter of 2025. We continue to expect a production increase to 47 per month in Renton this summer and will benefit from buffer inventory during the transition."
— Jay Malave, CFO

Assessment: The 47/mo summer 2026 target is intact and on schedule. Buffer inventory supports the transition. We model 47/mo from July 2026 with progressive learning-curve improvement through year-end.

3. North Line — Initial Production This Year

"As we discussed previously, production rate increases above 47 per month will be enabled by activating the 737 North Line in Everett. The North Line is expected to begin operations later this year at a low rate of initial production to demonstrate conformity to the FAA that will allow operations under our current production certificate. Following completion of these initial units, we will be led by our safety and quality plan to increase rate to 52 per month when the entire production system is ready."
— Jay Malave, CFO

Assessment: The North Line is the key enabler for 52/mo and beyond. Initial production at low rate this year + conformity demonstration to FAA = first half 2027 ramp to 52. Above 52 is FY28+ territory.

4. 777X — On Track for 2027 First Delivery

TIA 4a approved (natural ice testing — operationally important to leverage Alaska ice season). TIA 4b expected soon. GE engine durability issue: root cause identified, modification being finalized. Boeing working with supplier and FAA to fold into cert plan. "We remain on track for schedule of first delivery in 2027."

5. BDS — Fifth Consecutive Quarter of Held EACs

Five consecutive quarters now without a new fixed-price development program charge (excluding Q4 KC-46 production-support charge which was different category). Q1 op margin 3.1% +60bp YoY. KC-46 best-ever factory performance pre-pandemic. MQ-25 first flight imminent. PAC-3 expansion.

Malave's structural framing: "Performance, process and price discipline. … I think Steve Parker and his team are employing that exactly right now as they march up to this high single digit."

6. Q1 FCF Beat — Wiring Recovery + Collection Timing

"Free cash flow was notably better than expectations I shared last month largely driven by the solid recovery from the 737 wiring issue and favorable collection timing late in the quarter."
— Jay Malave, CFO

Assessment: The $500M beat is partly operational + partly timing. The Q2 outflow of "low hundreds of millions" framing implies the timing benefit doesn't fully reverse, supporting the H2 acceleration.

7. Debt Paydown — $6.9B in Q1

Debt down from $54.1B (Q4) to $47.2B (Q1) — the largest single-quarter debt paydown in the recovery. Driven by maturing debt paydown per the debt-reduction plan. $1.4B of maturities left in FY26. Combined cash + revolver position remains strong: $20.9B cash + $10B undrawn revolver.

8. Iran-Israel Conflict — No Impact on Deliveries

Per Ortberg: 14% of unit backlog is Middle East; 2/3 delivers in 2030+. No customer deferral requests. 4 aircraft delivered to Middle East customers in Q1 since conflict began. Higher defense op-tempo a positive for BDS aftermarket.

9. Defense Portfolio + $150B FY29 Plus-Up Composition

F-47 ($5B in FY26 budget), KC-46 ($4B), F-15EX ($3B), enhanced strategic SATCOM ($2B). Mostly funding additional production of existing systems — low risk. Boeing's structural positioning is favorable.

10. Spirit Integration — Tracking

$150M of Q1 BDS revenue from Spirit. Q1 BCA margin negatively impacted by Spirit dilution. Integration tracking; biweekly meetings with functional teams. $1B FY26 FCF drag still expected; similar in FY27; thereafter productivity + synergies + quality + pricing benefits.

11. Asia Trade — China Order Opportunity

"I think that's 100% dependent on the U.S.-China negotiations and relations. … I'm highly confident that, that will result if there's an agreement at the country level, as I said in my comments, I'm highly confident that, that will include some aircraft orders. … I'm not going to give you the number of airplanes, but it's a big number."
— Robert Ortberg, CEO

Assessment: A potential China order remains optionality. If realized, would be a meaningful incremental order book boost.

Analyst Q&A

Middle East conflict impact + scenario planning

Q: "I wanted to ask your thoughts on the conflict in the Middle East and potential impacts to deliveries, your commercial services and weapons businesses and free cash flow and just how we think about scenario planning if the conflict drags another 3 months, 6 months or 9 months?"
— Sheila Kahyaoglu, Jefferies

A: "We have seen no impact so far. No customers are requesting changes in their deliveries. … I think the broader thing for us to watch is the overall impact of fuel prices and jet fuel price impact and whether that hits the aftermarket. As you know, we're less susceptible to aftermarket. It's a less — a smaller part of our overall portfolio going forward. … 14% of our unit backlog is in the Middle East for customers. But 2/3 of that backlog delivers out in 2030 and beyond. And we have pretty good ability to resequence airplanes in the 12- to 18-month time frame. So I think we'll be okay. … I'm encouraged with the near-term performance in our defense aftermarket. So hopefully, as I said in my remarks, we'll see some upside there, probably offset some of the downside if we see it in commercial."
— Robert Ortberg, CEO

Defense portfolio growth opportunities

Q: "I was wondering if we could maybe dig down deeper on the defense portfolio, both in terms of new product sales and in the services business, what you're seeing there? And where are other potential areas of growth that you didn't highlight in your prepared remarks?"
— Ron Epstein, Bank of America

A: "I'd put it in 2 categories. One is our product lines and portfolio are very much being utilized in the current war environment. So any time you see that kind of op-tempo, we're going to see service uptick associated with servicing those platforms. … And then you look at the overall, just I'll say, the defense budget increase, and I look at our portfolio, and we're really well positioned for that. … F-47, we see $5 billion in the budget for F-47. KC-46, increasing KC-46 production, $4 billion; F-15EX, $3 billion, enhanced — the enhanced SATCOM, strategic SATCOM of $2 billion. So massive increases in weapon systems as well. … as I look at our 5-year outlook for defense, we're going to see upside from what we had planned last year."
— Robert Ortberg, CEO

FCF profile + Q2 + upside/downside risks

Q: "Could you speak to the free cash flow profile for the rest of the year, particularly if the second quarter can get close to breakeven? And then is there any free cash flow downside risk on requests for progress payment deferrals, either from Middle East or other carriers? And is there upside free cash flow risk from the Chinese orders if those were to come to pass?"
— Myles Walton, Wolfe Research

A: "In the second quarter specifically, somewhat similar to last year, an outflow, but in the range of, say, low hundreds of millions of dollars. So as I mentioned in my prepared remarks, an improvement from where we landed here in the first quarter, continued ramp throughout the year, and we still feel very confident in that guide. … As far as variability on the upside, we had a really good start at BDS and BGS. You look at the revenue growth there, to the extent that we can continue to have strong growth, have that convert into net income and we can keep a lid on working capital, there could be some upside in those businesses. … nothing meaningful in terms of request that would cause right now any variability to our cash flow outlook."
— Jay Malave, CFO

737 path to 47 / 52 — Spirit role

Q: "I wanted to go to the 737 and you stabilized production at 42 a month. But I'd like to see what you can say about the process and time line to get to 47 and 52. … now that you're integrating Spirit, what are your thoughts on the timing of these next 2 rate breaks? And where beyond Spirit do you see some potential supply chain challenges?"
— Doug Harned, Bernstein

A: "We've done a really nice job of stabilizing at 42. … the rate increase from 42 will be done by this summer. That's our current plan. And I feel pretty good about that. We still benefit, as you know, from high levels of inventory. … When we go from 47 to 52, there's a couple of important dynamics that are a little bit different. That's where we bring in the North Line our fourth line of 737 production. … We're in the process now, as we talked about in the prepared remarks, of bringing that online, the capital is all in place, the facility is ready to go, we're hiring people, we're going to bring those people through the Renton production system so that they get experience in a stable environment."
— Robert Ortberg, CEO

787 — supply chain confidence + program financial profile

Q: "I heard the comments earlier on 787. And I'm wondering if we could dig in a little bit deeper there. First on what gives you the confidence in kind of overcoming the supply chain challenges there. It seems like the line in Charleston is doing quite well, but waiting on some suppliers, particularly with seats. And then on the financial profile of the program and bringing in Spirit, and we can see some increase in the deferred during the quarter, but how that moves from here and gets to the kind of healthy financial profile that we're looking for?"
— Seth Seifman, JPMorgan

A: "We've been struggling with getting the seat certifications complete for the new cabin configuration. … It has less impact on our factory production because we can essentially build the airplanes, it's that we can't deliver them. … In terms of the supply chain — other supply chain performance, it's been a tough quarter in terms of engine deliveries for us. They've fallen behind a little bit. We do have a recovery plan on engines. So we've got to stay on that recovery plan to allow us to get to the next increase of 10 — to 10 later on in the year. … As far as the financial profile and deferred production, Seth, we had a cost base extension. So we added to the block, which is a good thing at higher margin additions to the block. It will take us maybe a year or so to stabilize that and start working it back down, but all good news in terms of improving financial profile in that program."
— Robert Ortberg, CEO & Jay Malave, CFO

777X — TIA milestones + production ramp

Q: "On the 777X, you mentioned the FAA last month cleared Boeing to continue to kind of advance the program in this fourth phase out of the total of five. Can you maybe update us on your thinking on how this current certification phase and what milestones any investors should be kind of tracking? And then just related, long term, just given the complications that you've seen on seating and everything else, any reason to think the production system here couldn't deliver at a much higher rate than what it's averaged in the last 8 years of 2.5 aircraft a month?"
— Peter Arment, Baird

A: "We got the TIA 4a authorization, which was not a super large package, but it was a really important package because it had deicing and we want to get that deicing done while there's still ice available in Alaska. So that was a really good important one for us to get … The next one will be TIA 4b. We're expecting that very soon, and that's a pretty large package. … we're targeting 5 a month. And I think that's a reasonable — with the overall market demand and our capacity, I think that's a reasonable goal and where we expect to be."
— Robert Ortberg, CEO

$10B FCF + significant growth beyond

Q: "Jay, you made an interesting comment on longer-term free cash flow that you think you could have significant growth beyond the 10. I wondered if you would just talk about that a little more. I mean, I think we hear skeptics say, can they get to the 10 and then the 10 is peak because there has to be a downturn at some point or there has to be new aircraft investment at some point. I think people who are more bullish would say the production rates are still below demand."
— Noah Poponak, Goldman Sachs

A: "First things first, let's get to 10. That's a bogey that's been out there for quite some time. … the building blocks, whether it's 10 or even beyond that, are pretty much the same. A lot of it depends on the BCA recovery. … When you think about that for a second, these delivery profiles … What the increased production rates enable us to do is burn that off. At the same time, you get the compounding benefit of stepping into the higher-priced backlog. And a third compounding element to that is with the higher volumes, you're also going to see cost reduction through absorption and productivity. … this is all underpinned by a nearly $700 billion backlog that Kelly mentioned. … it's up to us as a management team, obviously, to execute, but it's all sitting there in front of us, and we're confident that we can deliver that."
— Jay Malave, CFO

BCA margin trajectory

Q: "I wanted to maybe just ask about BCA margins, the trajectory from here. We've gotten a lot of interesting commentary on the call on 787, 737, delivery production outlook, certification trends. But intra-quarter, it felt like there was a couple of chances where you guys wanted to just level set people on BCA margins. So I wanted to just ask a question where perhaps we could kind of get it in one place, BCA margins this year, next year, kind of how do you see the play-by-play evolution with so much going on with the 737 and the 787."
— John Godyn, Citi

A: "Let me just baseline you, again, in the quarter, BCA had 6.1% margins, a little bit better than what I talked about in March, and that was largely due to this onetime benefit that we received. Having said that, we still expect progressive improvement sequentially throughout the rest of the year. And that will, again, go carry over into next year where we expect the margins to turn positive mid next year. … We have such a strong backlog that's well priced, high confidence there. And so we've got, I think, over this time period, over this next 18 months or less, a solid path to get back to positive booking margins on that program."
— Jay Malave, CFO

Spirit cash drag + 777X change incorporation

Q: "On Spirit, I think, Jay, you've talked about $1 billion kind of cash drag from Spirit this year. How do you see that progressing into '27? … And then 777X change incorporation, I hear change incorporation. It sounds a bit scary based on past history when we hear change incorporation. What exactly is involved in terms of change incorporation? And how many aircraft kind of built aircraft are we potentially looking at where there — where change incorporation is going to be necessary?"
— David Strauss, Wells Fargo

A: "Change incorp is, is basically for the airplanes that we have built to incorporate all the changes that have happened since they've been built. So things that result from the certification program, things that happen as a result of productivity improvements or process improvements. So we go back in and we incorporate all those changes before we make the delivery. … We've got roughly 30 777s that will go through this change incorp process over several years. … On your question on Spirit, this year, we talked about $1 billion of negative cash from Spirit, partly due to just operating performance and the other part being related to CapEx. As we head into next year, probably similar types. And then beyond next year, we'll start to see that improve with the benefit of performance and productivity as well as synergy capture."
— Robert Ortberg, CEO & Jay Malave, CFO

BCA order campaigns + China potential

Q: "I'm curious if you could just talk about the big order campaigns you're pursuing on the BCA side. I know we talked a little bit about the China order, but how big could that be? When could it happen? And what are your expectations for kind of airplane orders this year?"
— Gautam Khanna, TD Cowen

A: "Let me specifically address the China order. I think that's 100% dependent on the U.S.-China negotiations and relations. … there's a big summit coming up between Trump and Xi. I'm highly confident that, that will result if there's an agreement at the country level, as I said in my comments, I'm highly confident that, that will include some aircraft orders. President Trump has been very focused on supporting us in international campaigns, and he's been very successful in doing that. So I think that's a meaningful opportunity for us. I'm not going to give you the number of airplanes, but it's a big number."
— Robert Ortberg, CEO

What They're Not Saying

• China order quantification. Ortberg confirms "a big number" but offers no commitment timing or aircraft count.
• Air India AAIB findings. No mention; investigation continues.
• Buyback / dividend timing. Capital allocation discipline continues; no signals.
• Spirit synergy targets. Beyond "performance, productivity, synergy capture" framing, no specific quantification yet.
• The Q1 BCA one-time accounting benefit. Not quantified explicitly — sub-$50M range estimated.
• Specific FY27 framework. Multi-year framework remains "very attainable" without year attribution.

Market Reaction

• Pre-print (April 21 close): ~$195. Stock had drifted lower from Q4 peak of $225+ on (a) Iran-Israel conflict commercial-aviation concerns, (b) 737 wiring issue in February, (c) broader industrial-sector compression in early Q1 2026.
• Day-of (April 22): Print landed pre-market. Strong reception: stock opened +4% on Q1 beat + reiterated FY26 guide. Held gains through the call. Closed ~$203 (+4.1%).
• Volume: ~12M shares (~1.5x 30-day average).
• Peers: Airbus +0.5%; defense primes mostly up modestly; aero suppliers (HXL, TDG, MOG.A, HEI) up 1–2%.
• Sell-side flow: Several PT raises into the $230–$280 range; ratings broadly maintained at Buy. Bull cases highlight FY26 +$1–3B guide intact; 737 rate path on schedule; BDS continued improvement. Bear cases reduced — most analysts now buy the recovery thesis though debate the timing of $10B FCF.

Interpretive read: The market processed Q1 as confirmation that the recovery is durable. Stock at ~$203 is well below our $250–$320 fair value range bottom — the disconnect creates better risk-reward. The next 6–12 months should deliver: 47/mo 737 in summer 2026; H2 FCF positive sequential acceleration; potentially China order; 777X TIA 4b approval; BDS sequential margin progression. Each milestone supports the rerate path back toward $250–$300.

Street Perspective

Debate 1: How sharp is the H2 2026 FCF inflection?

Bull view: Q1 used $1.5B (better than guided). Q2 outflow "low hundreds of millions" implies modest improvement. The FY26 +$1–3B guide implies +$4–6B FCF in H2 alone. With 47/mo 737 ramping + better BDS performance + KC-46 tanker advances on PAC-3, H2 could deliver above the high end. Exit-rate run-rate $8–10B annualized into FY27.

Bear view: The H2 acceleration is heavily dependent on (a) the 47 rate transition being smooth, (b) Spirit drag staying at $1B and not deepening, (c) no new 777X charge, (d) Iran conflict not affecting deliveries. Each is a small risk; aggregated risk is meaningful. H2 +$2–3B FCF (low end of implied range) is more realistic baseline.

Our take: We model H2 +$4B FCF (midpoint), which fits the guide. Q1 outperformance provides $500M cushion. The 47 transition + Spirit drag + 777X are the three swing factors; on balance we expect outcomes in the guided range.

Debate 2: Is BDS at high-single-digit margin a 2027 or 2028 event?

Bull view: 5 consecutive quarters of held EACs + Q1 3.1% op margin + FY26 target 3.5%+ + sequential acceleration = path to 5%+ in 2027 and 7%+ in 2028. The combination of charge runoff + defense budget growth + active management gets BDS to 8%+ by 2028. F-47 + PAC-3 + KC-46 follow-on + classified all support.

Bear view: The path from 3.1% to high-single-digit (8%+) is multiple expansion steps. Each requires sustained improvement. Any one of T-7A, Starliner, MQ-25, KC-46 follow-on could deliver a $500M+ charge. The 2027-2028 timing is plausible but back-end loaded.

Our take: We model BDS at 5% in 2027 and 7% in 2028; high-single-digit (8–9%) by 2029-2030. The progressive sequential improvement framework supports the upgrade case but requires sustained execution.

Debate 3: Does the stock at ~$203 reflect the recovery already?

Bull view: No. At ~$200, BA trades at ~10x FY28E FCF/share (assuming $10B FCF + ~660M shares). The pre-MCAS multiple was 18–22x. Even at 15x FY28E FCF, fair value is ~$225+. Adding capital return reinstatement in 2028+ and the equity value math is structurally favorable. Path to $300+ over 12–18 months.

Bear view: The stock has been range-bound $170–$240 for 18 months. Every quarter of improvement is met with market skepticism — and rationally so given the multi-year recovery uncertainty. ~$200 may reflect the structural rerate has already happened in 2024 and the next leg requires demonstrated FCF rather than promised FCF.

Our take: The $250–$320 range is well-supported by the FY28 FCF math. Stock at $203 is at our fair value range bottom-minus-$50 — meaningful upside. The catalyst path for the rerate is: H2 2026 FCF inflection; 47/mo achieved; 777X TIA progress; BDS sequential margin expansion; eventually buyback / dividend reinstatement. Each milestone moves the equity toward fair value.

Model Implications & Thesis Scorecard

Model Update

• FY26 FCF: $2B (midpoint, unchanged). H1 ~$(1.7B) usage; H2 ~+$3.7B positive. Exit run-rate ~$8B annualized into FY27.
• FY26 EPS: $1–2 core. Progressive sequential improvement.
• FY26 BCA deliveries: ~660 (737 ~500; 787 90-100; 777 ~30+30 built).
• FY27 FCF: $5–6B (unchanged).
• FY28 FCF: $8–9B (unchanged).
• FY29 FCF: $10B+ (achievable).
• Fair value range: $250–$320 (unchanged). Stock at $203 = ~10x FY28E FCF/share.

Thesis Scorecard

Rating & Action

Maintaining Outperform. Q1 2026 is exactly what was needed to validate the upgrade thesis. Clean quarter, FY26 guide reiterated, 737 rate path on schedule, BDS fifth consecutive quarter of held EACs, 777X TIA 4a approved, $6.9B debt paydown, $576B record BCA backlog. The wiring issue resolution demonstrates operational discipline. The Iran-Israel conflict has not impacted deliveries. The recovery is durable and progressing.

Fair value range: $250–$320 (unchanged). Stock at ~$203 is meaningfully below the bottom of our range, reflecting the market's broader "show me" stance on multi-year FCF inflection. The catalysts to bridge $203 → $250+ are: H2 2026 FCF inflection delivery; 47/mo 737 in summer; 777X TIA 4b; BDS sequential margin expansion. We expect at least 2 of these to deliver by year-end 2026, supporting the rerate.

Key watch items into Q2 (July):

• Q2 FCF cadence — does the "low hundreds of millions" outflow framing hold?
• 737 47/mo approval — FAA timing and KPI progression.
• 777X TIA 4b approval timing.
• BDS Q2 op margin — sequential progression toward 3.5% FY target.
• Spirit integration milestones.
• China order momentum — post Trump-Xi summit timing.
• Iran-Israel conflict trajectory and any spillover.
• 787 supply chain (seats + engines) resolution.