Boeing Increased 737 MAX Production. That’s Good News for the Stock.

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Boeing
’s
production rate for 737 MAX jets is going back to 31 a month. That’s just where

Boeing

should be on its road to recovery.

J.P. Morgan analyst Seth Seifman noted the production increase in a Tuesday report.

Boeing (ticker: BA) has been slowly ramping production of the MAX back up since halting production completely around December 2019. The halt came amid the worldwide grounding of the MAX, which began in March 2019, following two deadly crashes occurring within five months of each other.

The production increase news comes as Boeing is faced with another crash. A China Eastern Airlines 737-800 crashed Monday. That jet wasn’t a MAX. The 737-800 is part of the so-called Next Generation, or NG, family of 737 jets introduced back in 1997. The 737 involved in the crash was delivered in 2015.

The NG family of jets has good safety history, relative to other aircraft programs in commercial aviation. The NG family of aircraft has suffered a catastrophic accident with fatalities once about every 11.1 million flights. That is similar to the Airbus (AIR.France) A320 family of jets.

Boeing built and parked more than 400 MAX jets during the grounding. That consumed a lot of cash. The company spent money on labor and parts, but received no new revenue from the jets. MAX production was back at about 16 a month as of mid-2021.

Management’s plan was to ramp up production to 31 a month by early 2022. Seifman was worried that the timing for the production rate increase was slipping since the company delivered more than 30 MAX jets in a month only twice since resuming production around December 2020. “If Boeing is in fact building at 31 [a month] now, it will need deliveries to pick up in order avoid increases in inventory,” he wrote.

A pickup in deliveries will help Boeing’s cash flow. The company has burned through more than $28 billion in cash between 2019 and 2021.

Analysts project Boeing will generate positive free cash flow of about $2.3 billion in 2022 while delivering more than 470 MAX jets. In 2023, analysts project about $11 billion in free cash flow and about 550 MAX deliveries.

Since the MAX returned to commercial service, Boeing has delivered roughly 320 MAX jets. That means the company likely has delivered about half of the MAX inventory accumulated during the grounding.

Boeing stock was up 2.6%, at $190.64, in recent trading. The

S&P 500
and

Dow Jones Industrial Average
are both up about 0.8%.

Coming into Tuesday, Boeing shares were down about 8% year to date. Shares are still down almost 60% from an all time high of about $446 a share. The peak came shortly before the second 737 MAX crash involving a Ethiopian Airlines flight in March 2019.

Write to Al Root at [email protected]