Boeing might sell part of its defense business, Bloomberg reported Tuesday.
Wall Street, and investors, will be interested in any sale. It’s too early to tell exactly what might be sold so, for now, investors should prepare and watch for what’s next.
Boeing didn’t immediately respond to a request for comment about the Bloomberg report.
Boeing’s defense business — which it calls Boeing Defense, Space & Security — generated about $25 billion in 2023 sales and an operating loss of about $1.8 billion. It was the second consecutive annual loss for the unit. Fixed price contracts and higher-than-expected inflation have been an issue for many defense contractors in recent years.
In the five years before the pandemic, the business generated an average operating profit of about $2.3 billion a year, corresponding to a profit margin of about 9%.
Wall Street expects sales to hit about $25.6 billion in 2024, up about 3%. Operating profit is projected to be positive at about $546 million.
Boeing isn’t all that active in M&A. The most significant sale in the recent past was the 2005 sale of the business that is now Spirit AeroSystems to Canadian private-equity player Onex. Boeing is now considering buying Spirit Aero to gain more control of its manufacturing process.
Boeing bought some parts distribution in 2018 for about $4.2 billion.
Any sale that raises billions can help pay down debt. Boeing ended 2023 with about $54 billion in total debt, according to Bloomberg. That’s up from about $14 billion before two Boeing 737 MAX crashes and the pandemic.
Boeing stock was flat in midday trading with the S&P 500 up 0.1% and the Nasdaq Composite down about 0.2%. Through midday trading, Boeing stock was off about 31% year to date.
Those declines are mainly related to problems with the 737 MAX program. An emergency door plug blew out of a 737 MAX nine jet operated by Alaska Air on Jan. 5, leading to questions about Boeing’s quality and manufacturing process as well as more oversight from the Federal Aviation Administration.