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Boeing (BA -9%) is trading lower after the company issued a rough Q1 earnings report this morning. However, the stock's price has rallied nicely off its lows thanks to the company's bullish earnings call (see 11:29 InPlay for details).

• The report definitely included negative aspects, including sizable misses for both core EPS and revenue. The Defense segment was weak, and results were pressured by the Russia/Ukraine conflict, inflation, and COVID, particularly in the first half of quarter. Analysts had been predicting that Q1 would be Boeing's last unprofitable quarter during the pandemic era. Given Q1's huge miss, which followed a big miss in Q4, we wonder if consensus will remain positive when analysts update their models.
• The other major negative was that Boeing pushed back the first delivery of its 777-9 (passenger version) model into 2025. The 777-8 (freight version) has launched. Although the delay is disappointing, it is not entirely surprising. The timeline had also been pushed back last year. Boeing characterized the extension of the timeline as a lesson-learned on the new FAA certification process, which is rigorous; the company stated that it needs the "time and freedom to get this right with the FAA". BA expects the new timetable to get it to the finish line.
• The narrow-body 737 MAX tends to draw investors' attention, but elsewhere, we continue to think the 777X has the potential to really transform the wide-body (two aisle) airplane market as the world's largest and most efficient twin-engine jet. Currently, many wide-body planes require four engines, thus demanding more fuel and more maintenance. Also, a significant number of wide-body planes will reach the end of their useful lives in coming years. In light of this opportunity, the repeated delays to the 777X are especially frustrating.

So, why has the stock bounced since the call ended? For one thing, Boeing was bullish on commercial travel demand, excepting in China. Airlines are adding flights, and even long-haul traffic is returning.

Boeing also, in response to a question on the call, stated that it sees no need for a debt or equity raise and that it feels comfortable with its liquidity position. As its big losses continue, and as Boeing burned through $3.2 bln in operating cash in Q1, it is natural to think that a debt or equity offering could be a possibility, but that seems to be off the table for now. In fact, Boeing reiterated that it expects to be cash flow positive in 2022.

Overall, Q1 was certainly a bumpy quarter that called into question whether Boeing will actually return to positive core EPS in Q2. We think Q3 or Q4 may be more likely, but we do not create models. The 777X push back is frustrating as well. The silver lining is that the wide-body market has not recovered as quickly as the narrow-body market has, so time still remains. However, last quarter, Boeing had said that it was taking longer to fix structural issues with the fuselage on the 787. It seems that issues keep cropping up, but we think that Boeing will in time manage to resolve what needs resolving.