Boeing Stock Drops. There’s a New Risk to Production Increases.

A Southwest Airlines Boeing 737-8 MAX airplane prepares to land at Ronald Reagan Washington National Airport in Arlington, Va. (Saul Loeb / AFP / Getty Images)

Boeing investors have to track a new risk: air-traffic control.

The stock dropped on Tuesday, after the company reported its August delivery figures, even though the results were as expected. The problem could be that instead of focusing on the fact that the company is making and delivering planes faster, investors might be worrying about the ability of the company’s regulator, the Federal Aviation Administration, to get all of its work done.

For August, Boeing delivered 57 jets, including 42 MAX jets. That is up from 48 jets and 37 MAX jets in July. Year to date, Boeing has delivered 385 commercial planes, up from 258 over the same span of 2024.

The company has to deliver about 49 jets per month for the final four months of the year to hit Wall Street’s projection of 580 commercial plane deliveries in 2025.

While the data show the company is making progress, Boeing stock dropped 0.6%, closing at $229.52, while the and rose 0.3% and 0.4%, respectively.

Investors might be paying attention to a report from Reuters that pointed out the FAA might not be ready to raise the limit on production of 737 MAX jets it imposed shortly after an emergency-door plug blew out of one of those planes, leaving a hole in the fuselage during a flight in January 2024.

Boeing is allowed to make 38 MAX jets a month. It aims to increase that rate to 42 a month in the coming weeks. But Reuters reported Monday evening that the FAA hasn’t made a decision about a production rate increase.

The FAA didn’t immediately respond to a request for comment, but said to reporters at an event in Washington on Monday: “Progress is being made. It may not be as fast perhaps as Boeing would like, but it is as fast as [the FAA] we can reasonably move through the process.”

The FAA is juggling a lot right now, including an overhaul of the air-traffic control system. The agency opened bidding for an air-traffic control overhaul in late August.

“This is the next important step to making our skies safer and air travel more efficient,” said U.S. Transportation Secretary Sean P. Duffy in a news release. “To avoid the missed deadlines and mistakes of the past, we’ve designed an innovative process to select and contract with one Prime Integrator.”

The entire project is expected to cost tens of billions and take three to four years. Congress authorized $12.5 billion for modernization earlier this year.

When asked about production rate increases, Boeing referred Barron’s to comments made by CEO Kelly Orberg on the company’s July second-quarter earnings conference call. “In the quarter, we achieved a rate of 38 airplanes per month,” Orberg said. “We expect to be in a position to request approval from the FAA in the coming months to increase to 42 aircraft per month.”

Eventually, the rate cap should move higher, provided the FAA is happy with Boeing’s progress in improving quality and production control. Whether that is weeks or months away shouldn’t matter all that much to investors.

Boeing stock, in some respects, is being valued based on estimates of free cash flow for 2027 and 2028. The company isn’t expected to generate much free cash flow in 2025 and 2026 combined, but Wall Street expects roughly $20 billion in cumulative free cash flow in 2027 and 2028. Analysts project $17 billion in free cash flow for Airbus over the same span.

Both companies have a market value of approximately $175 billion. That means investors are focused on the future at Boeing, rather than on current deliveries and earnings.

Write to Al Root at allen.root@dowjones.com