Boeing (BA) 2025 — Grade F: $9.6B One-Time Gain Masking $7B Loss

Grade: F — Major Red Flags

Framework: Schilit *Financial Shenanigans* + Beneish M-Score + forensic accounting principles

Data: SEC EDGAR 10-K (Filed 2026-01-30) + Yahoo Finance

Auditor: Deloitte & Touche LLP — Clean opinion (unqualified, with critical audit matters on fixed-price contracts and Spirit acquisition)

One-line verdict: Boeing reported its first annual profit in four years ($2.2 billion), but the number is almost meaningless. Commercial Airplanes lost $7.1 billion. Defense lost $128 million. The only profitable segment — Global Services — reported $13.5 billion in operating income, inflated by a $10.55 billion gain on the Digital Aviation Solutions divestiture. Strip that out and Boeing's entire operation is still deeply unprofitable. Operating cash flow was just $1.1 billion on $89.5 billion in revenue. Free cash flow was negative $1.9 billion. Total debt is $54.4 billion against $5.5 billion in shareholders' equity — meaning 91% of Boeing's assets are funded by creditors. Three red flags triggered: CFFO barely covers net income, goodwill is 345% of equity, and Debt/EBITDA is 7.4x with negative interest coverage. This is a company in financial distress masquerading as a recovery story.

The Numbers: A Recovery Narrative That Doesn't Add Up

Boeing's revenue surged 34% to $89.5 billion and the company reported net income of $2.2 billion — its first profit since 2021. But the details tell a very different story.

Global Services reported a 64.4% operating margin — up from 18.1% a year ago. This is entirely due to the Digital Aviation Solutions Divestiture. The 10-K states: "On October 31, 2025, we completed the divestiture of portions of our BGS segment's Digital Aviation Solutions business (Digital Aviation Solutions Divestiture) for $10.55 billion in an all-cash transaction." Remove that one-time gain and BGS margins would be approximately 14% — consistent with prior years. Boeing's headline "profit" is essentially a gain on selling a business unit.

ROE is meaningless for Boeing. In 2024, shareholders' equity was negative $3.9 billion — Boeing owed more than it owned. In 2025, equity recovered to $5.5 billion only because of the $18.2 billion equity raise in late 2024 and the divestiture gain. ROE calculations on near-zero equity produce absurd numbers.

Cash Flow: Barely Positive, Free Cash Flow Still Negative

The 10-K explains: "Net cash provided by operating activities was $1.1 billion during 2025 compared with net cash used of $12.1 billion during 2024. The $13.1 billion increase in net cash provided by operating activities was primarily driven by higher commercial airplane deliveries, lower customer considerations and working capital improvements."

CFFO/NI of 0.48 — only 48% of reported profit is backed by cash. This triggers a red flag. The reported $2.2 billion net income includes the massive divestiture gain, but operating cash flow was only $1.1 billion. The "non-cash items" line was negative $171 million, dominated by the gain on the Digital Aviation Solutions divestiture partially offset by "higher combined 777X and 767 reach-forward losses."

Free cash flow was negative $1.9 billion — the second consecutive year of negative FCF. Boeing burned through $14.4 billion in 2024 and another $1.9 billion in 2025.

The Crisis Behind the Numbers

Commercial Airplanes: Still Bleeding

BCA lost $7.1 billion in 2025 on $41.5 billion of revenue — a -17.1% operating margin. The 10-K describes the root cause: "On January 5, 2024, a 737-9 flight made an emergency landing after a mid-exit door plug detached in flight. As a result of the accident, the Federal Aviation Administration (FAA) performed an investigation into the 737 quality control system and imposed certain additional requirements and restrictions."

Deliveries rebounded to 600 aircraft in 2025 (from 348 in 2024), but the damage continues:

Defense: Fixed-Price Nightmares

BDS loss from operations was $128 million in 2025 — a dramatic improvement from the $5.4 billion loss in 2024. The 10-K explains: "During 2025, losses incurred on the five major fixed-price development programs totaled $802 million, primarily on KC-46A Tanker ($714 million), compared to losses of $5,013 million during 2024."

Deloitte flagged these contracts as a critical audit matter: "The operational and technical complexities of fixed-price development contracts create financial risk, which could increase the estimates of costs and result in lower margins or material reach-forward losses." The auditor noted that "margins on fixed-price development contracts are inherently uncertain" and the audit required "professionals with specialized industry experience." Five programs remain problematic: KC-46A Tanker, T-7A Red Hawk, Commercial Crew, VC-25B Presidential Aircraft, and MQ-25.

The Spirit AeroSystems Acquisition

On December 8, 2025, Boeing completed the acquisition of Spirit AeroSystems for approximately $4.7 billion in Boeing shares, plus assumption of Spirit's debt. The 10-K states Spirit "employs approximately 15,000 people" and includes "fuselages for the 737, P-8 and KC-46 Tanker programs, as well as major structures for the 767, 777 and 787 programs."

This adds approximately $17.3 billion in goodwill to Boeing's balance sheet. Deloitte excluded Spirit from its internal controls assessment, noting Spirit constitutes "approximately 9 percent of Total assets and less than 1 percent of each Total revenues."

The 18-Point Screening

Revenue Quality: Is the Revenue Real?

Revenue quality checks all passed. The 34.5% revenue surge is driven by aircraft deliveries nearly doubling (600 vs 348), which is verifiable through delivery records. Cash collections improved dramatically from the 2024 trough.

Expense Quality: Are Costs Being Hidden?

B3 is concerning. When SG&A expenses exceed gross profit by 42%, it means the company's operating expenses alone consume more than its entire gross margin. Boeing's razor-thin 4.8% gross margin leaves almost nothing to cover overhead, R&D, and interest expense.

B4 is a watch item. The swing from -3.0% to +4.8% looks like improvement, but a 4.8% gross margin is pathologically thin for an aerospace manufacturer. In 2023, before the door plug crisis, it was 9.9%.

Cash Flow Quality

C1 is a red flag. The headline net income of $2.2 billion is propped up by the Digital Aviation Solutions divestiture gain. Operating cash flow of just $1.1 billion tells the real story — Boeing's ongoing operations barely generate cash.

C2 — negative free cash flow for the second consecutive year. Two consecutive years of burning cash ($14.4B in 2024, $1.9B in 2025) while carrying $54.4 billion in debt is dangerous.

C4 — cash covers only 54% of debt. Boeing's debt maturity schedule from the 10-K: $8.4 billion due in 2026, $4.4 billion in 2027, $2.7 billion in 2028, $2.5 billion in 2029, $5.3 billion in 2030. The 2026 maturity alone will consume 29% of current cash reserves.

Balance Sheet Health

D1 is a red flag. Goodwill of $17.3 billion plus intangibles of $1.6 billion equals $18.8 billion — 345% of shareholders' equity of $5.5 billion. If Boeing were forced to impair even a fraction of this goodwill (much of it from the Spirit acquisition), shareholders' equity would be wiped out again.

D2 is a red flag. Debt/EBITDA of 7.4x means it would take Boeing over 7 years of current earnings to pay off its debt. Interest coverage of -2.0x means operating earnings don't even cover interest expense. The 10-K shows interest expense of $2.8 billion against operating income of $4.3 billion — but $4.3 billion includes the divestiture gain. Excluding it, operating income would be approximately negative $6 billion, making real interest coverage deeply negative.

Acquisition Risk

The Spirit acquisition added massive goodwill to an already strained balance sheet. Boeing paid with stock (diluting existing shareholders) and assumed Spirit's debt. Free cash flow has been negative in two of the last three years, meaning Boeing cannot fund acquisitions from operations.

Beneish M-Score: Manipulation Detection

The M-Score does not flag manipulation. Boeing's financial problems are not about engaging in earnings manipulation — they are about a fundamentally unprofitable operation generating enormous real losses.

Altman Z-Score: Bankruptcy Risk

The Z-Score of 1.38 places Boeing in the "grey zone" (between 1.23 and 2.90), indicating elevated bankruptcy risk. The key drivers:

Key Risks from the 10-K

1. Commercial Airplanes Cannot Generate Profit — $7.1 Billion Operating Loss

BCA has lost money every year since the 737 MAX crisis began. In 2025, despite delivering 600 aircraft and generating $41.5 billion in revenue, the segment lost $7.1 billion. The 10-K cites "higher combined reach-forward losses of $5,283 million on the 777X and 767 programs" as a primary driver. The 777X — Boeing's next-generation wide-body — continues to generate losses before it has even entered commercial service.

2. $54.4 Billion in Debt With Negative Free Cash Flow

Boeing's total debt stands at $54.4 billion. The 10-K shows $8.4 billion in debt maturing in 2026 alone. With negative free cash flow and a cash balance of $29.4 billion (including $17.8 billion raised through equity and preferred stock issuance in late 2024), Boeing is reliant on capital markets. The 10-K discloses the October 2024 equity raise: "we issued 129,375,000 shares of common stock... we received cash proceeds of $18,181, net of underwriting fees." Boeing also issued $5.7 billion in mandatory convertible preferred stock paying a 6% annual dividend.

3. Fixed-Price Defense Contracts — An Ongoing Drain

Five fixed-price development programs (KC-46A Tanker, T-7A Red Hawk, Commercial Crew, VC-25B, MQ-25) generated $802 million in losses in 2025 and $5.0 billion in 2024. These contracts have fixed revenue but escalating costs. Deloitte's critical audit matter states these involve "significant variability" in cost estimates and "the limited amount of historical data available in certain instances." Every quarter brings potential for new reach-forward losses.

4. Labor Relations — Repeated Work Stoppages

The 10-K describes two major strikes in 2024-2025:

The next risk: "Our contracts with the Society of Professional Engineering Employees in Aerospace, representing approximately 16,000 Boeing employees, are scheduled to expire in October 2026, and could also have a material impact on our financial position."

5. The Spirit Integration Risk

Deloitte excluded Spirit from its internal controls assessment. The 10-K notes Spirit constitutes "approximately 9 percent of Total assets." Integrating 15,000 employees and multiple manufacturing facilities while Boeing is still recovering from its own quality crisis adds significant execution risk. Spirit's own history of quality problems was a root cause of the 737 MAX door plug incident.

Summary

Boeing's FY2025 10-K reveals a company still deep in crisis despite the headline "return to profit." The $2.2 billion net income is artificial — driven by a $10.55 billion one-time divestiture gain while the core airplane business lost $7.1 billion and the defense business lost another $128 million. Operating cash flow was just $1.1 billion. Free cash flow was negative $1.9 billion. For the second consecutive year.

Three red flags confirm the severity:

Six additional watch items underscore the fragility: SG&A exceeds gross profit, gross margin is barely positive at 4.8%, FCF is negative, cash covers only 54% of debt, acquisitions are destroying value, and goodwill surged 88%.

The Altman Z-Score of 1.38 places Boeing in the grey zone — statistically meaningful bankruptcy risk. This is not a theoretical concern for a company burning cash with $8.4 billion in debt maturing in 2026.

What could change the story: Boeing has a $567 billion commercial backlog and the commercial aviation duopoly is structurally favorable. If 737 production ramps to 38/month, the 777X achieves certification, and defense losses stabilize, Boeing could return to meaningful profitability. But "could" is doing a lot of work in that sentence.

Bottom line: Boeing warrants elimination from consideration from a quality screening perspective. The financial statements show a company that cannot profitably manufacture its core products, cannot cover its interest expense from operations, and is surviving on asset sales and capital raises. The business has real value — strong backlog, duopoly position, essential defense programs — but the current financial condition presents too many red flags for our screening framework.

**Disclaimer**: This report is based on Boeing's FY2025 10-K (SEC EDGAR) and public financial data. It uses forensic accounting screening frameworks (Schilit's *Financial Shenanigans*, Beneish M-Score, Altman Z-Score) for red flag detection. This is NOT investment advice. Screening for red flags does not constitute a buy or sell recommendation. Past financial performance does not predict future results. Always do your own research and consult a qualified financial advisor.

**About EarningsGrade**: We screen earnings reports to help investors identify financial red flags. Our approach: "Screen out, not screen in." A passing grade means no red flags were detected — it does not mean the stock is a good investment.