Operator: Thank you. [Operator Instructions] We’ll go first to Michael Ciarmoli at Truist Securities.
Michael Ciarmoli: Hey. Good morning guys. Thanks for taking my question. I guess, Patrick or Nick, maybe, just thinking about the 2024 revenue guidance on Commercial Aero. You just did 17% growth, the guidance for mid-teens. We’ve got rates ramping. Obviously, MAX news is still fresh, but what would really cause growth deceleration there? And maybe could you just give us some of the expected production rates sort of underpinning that outlook by platform, if you can?
Nick Stanage: So Michael thanks for the question. As we have exited the pandemic clearly, the supply chain went through some challenging times with respect to deliveries, lead times, et cetera. And although those are getting better, there’s still some uncertainty and some impact being driven. So I think if you look at the platforms in the commercial space, you can go down the list to A350, 320 and 220, with plans to be anywhere from 10 to 75 on the A320 in the 2026 timeframe, 14 on the 220, a similar story for Boeing getting to 10 per month on the 787 in 2025, 2026 timeframe, 50 for the 737 in the 2025, 2026 time. I think there clearly is the demand for those platforms and those aircraft and those ramp rates. Again, the question we’ll be working through some near-term issues on the Boeing side, working through some continued stress and continued recovery on the supply chain.
And we feel very good about our plan and the balance we put into it. And feel comfortable that. We have some conservatism in there. And quite frankly, if the supply chain performs, we see a potential upside for 2024 and beyond.
Michael Ciarmoli: Got it. Okay. Helpful. Thanks guys. I’ll just stick to one. And jump back in the queue.
Nick Stanage: Thanks, Michael.
Operator: We’ll move to our next question from David Strauss at Barclays.
David Strauss: Thanks. Good morning.
Nick Stanage: Good morning.
Patrick Winterlich: Good morning.
David Strauss: Nick, could you maybe just expand a little bit on why narrowbody, I guess, narrowbody was — lap for you guys last quarter and that are in Q3 and now down in Q4 exactly? What are you seeing there? Are you seeing destocking, or what — because this seems to be unique. We’re not hearing about this from any other companies at this point?
Nick Stanage : So a couple of data points, just to educate. We’ve talked about this before, and that is the complexity of the supply chain. So if you just think of the A320, we have over 80 ship to locations, when you look at engines, nacelles, structures and airframes. On the 737, it’s less. It’s closer to 30-plus, but it just gives you an idea for the complexity of the supply chain. Again, I would remind the listeners that the A320, we’ve shared — tends to be at the high end of our shipset content of the range we provided, the 200,000 to 500,000, whereas the 737 tends to be at the low end. So having said all that, entering 2023, there was an expectation that build rates perhaps we’re going to ramp more quickly than they did.
And in that some of that supply chain, added buffer, added safety stock so that they could not — so that they could deliver and not end up shorting the customer. Work through the year, the ramp rates were not accelerating the way some expected. And then there’s no doubt in my mind that fourth quarter and particularly December, some of the supply base, put the brakes on, managing cash, managing their buffer stock and put some of that inventory out. So again, it’s tough to look at quarter-to-quarter. You really need to look at multiple quarters and average it out to really know what’s going on to get aligned with what the OEs are doing on their final assembly lines.
David Strauss : Okay. Thank you for that color. And a follow-up on the margin side, Patrick. Back into it, it looks like you’re implying about a 14% margin all in, in 2024. I guess, I mean, you talked about things getting — improving as you absorb labor as you go through the year. But can you kind of compare that 14% to, I think, prior, you had said close 15%, 16%. And obviously, back several years ago when we were at a similar revenue level as you’re projecting for 2024, I think you were doing closer to 17%, 18% margins. Thanks.
Patrick Winterlich : Yes. So to call out, I mean we’re one of the first differences, which we put in our statement with — if you look at year-over-year margins and you look at the total company and EPS, obviously, I just want to point out the $0.09 around ACM, which won’t be there now going forward. And I think if you kind of look at the volume difference between our guidance and sort of the Street guidance, again, this kind of a volume step down. And I think if you put all that together, the EPS is start to get much closer. But in terms of the operating margin that you’re talking about, yes, I think you’re backing into a number, we’re somewhere in that 13.5%, 14% range. I think that’s about right. And I think there are a number of headwinds.
I think as Nick was just talking about, we started 2023 extremely strongly. And I think everyone was excited about the narrowbody ramps and things moving forward and a lot of inventory got pulled into the pipeline. And as Nick said, I think in the second half of the year, there was a bit of an adjustment and then pull back. But as we went into the year, we don’t have that ability to turn and change. We’ve been bringing in labor. We’re training labor, we’re investing in infrastructure. We’ve got our lines up and running. We’re maintaining them. And so we’re positioned for higher growth. And we’re ready for that ramp rate certainly through 2024. And so that currently, and we called it out in 2023 and perhaps for another quarter or two, is a headwind, it is a headwind to our margin and it’s pushing us down to where we wanted to be, where we expected to be.
