Boeing on Wednesday reported a profit of $160 million, down from $567 million, or $1, during the same period a year earlier. Sales in the quarter fell 2% to $16.7 billion, missing analysts $17.6 billion forecast. BA said it had positive operating cash flow in the second quarter. It reiterated the target of generating surplus cash for the full year. Boeing’s defense business continued to be weighed down by around $400 million in charges during the quarter.
BA continues to await regulatory approval to resume deliveries of its 787 Dreamliner. The company increased 737 Production To 31 Per Month up from 16 a year ago.
Earnings
Highlights
Most people associate BA with its commercial aircraft, but its defense unit has been much larger in recent quarters and has helped the company to weather the COVID storm. The company on Wednesday reported a profit of $160 million, or 32 cents a share, for the quarter to June 30, down from $567 million, or $1, during the same period a year earlier.
The adjusted per-share loss of 37 cents, which excludes pension charges, missed the 13-cent loss consensus among analysts polled by FactSet. Sales in the quarter fell 2% to $16.7 billion, with analysts expecting $17.6 billion.
Boeing Q2 22 Earnings:
- Adj EPS: -$0.37 (est $0.01)
- Revenue: $16.7B (est $17.55B)
- Operating Cash Flow $81M (est -$342.7M)
- Increased 737 Production To 31 Per Month up from 16 a year ago
- Backlog $372B Including Over 4200 Commercial Planes
“While we understand the sort of recession fears that are growing out there, so far it has not impacted the aviation industry or our customers,” Chief Executive David Calhoun said.
The 737 MAX gets most of the attention, but the 777X has the potential to really alter the wide-body market. The 777X will be the world’s largest and most efficient twin-engine jet. Currently, all wide-body planes require four engines. Cutting that to two engines will save a lot on fuel and maintenance costs. Notably, a lot of wide-body planes are reaching the end of their useful lives.
Production
Boeing has dealt with production and regulatory problems that have impeded a recovery from two crises: a nearly two-year grounding of its 737 MAX after two fatal crashes in 2018 and 2019, and the pandemic’s hit to demand for new aircraft.
Production of the 737 MAX has reached 31 planes a month, up from 16 a year ago, as it deals with supply-chain challenges such as engine shortages that are also affecting rival Airbus SE. Airbus cut its aircraft delivery guidance for this year and slowed production plans, citing delays in its supply chain.
Boeing CFO Brian West on Wednesday said the company now estimates it will deliver closer to 400 of the 737 MAX jets by the end of 2022. As of June 30, the company had handed over 181 of the aircraft to customers.
Airbus will deliver 700 aircraft this year, 20 fewer than it had initially planned, it said on Wednesday. While it held on to plans to increase production of its bestselling narrowbody family to 75 a month in 2025, it said production would increase more slowly through 2023. Rates for that aircraft, the A320, will now only reach a rate of 65 a month in early 2024, about six months behind schedule. Rates are currently at about 50 a month. The A320 compete with Boeing’s 737 MAX. – WSJ
Boeing executives said Wednesday they are on the verge of receiving regulatory approval to resume deliveries of its wide-body 787 Dreamliner. A series of production issues has kept them from handing over that jet to customers for much of the last two years, leaving it with more than $25 billion of the aircraft in inventory.
Charges
Boeing’s defense business continued to be weighed down by around $400 million in charges during the quarter.
- $93 million on its Starliner space capsule in the quarter. Boeing successfully launched the Starliner in May, but it has incurred higher costs after earlier failed attempts to launch and dock with the International Space Station.
- Boeing also took a $147 million charge on its MQ-25 refueling drone as costs rose to meet requirements set by the U.S. Navy.
Outlook
“We do believe we’re in the middle of a momentum shift,” Chief Executive David Calhoun said in a call with analysts Wednesday.
Boeing faces a possible strike at three of its defense plants from Aug. 1 after workers rejected a new contract, which Mr. Calhoun said on CNBC could disrupt deliveries.
First Quarter Recap
In the first quarter Boeing hits reported a loss as expected, but at $(1.53) it was significantly larger than the consensus of $(1.08). Revenue also came up short. Revenue for the company’s Commercial Airplanes segment fell 31% yr/yr to $4.27 bln, which was modestly better than the 37% decline reported in Q4. Boeing continued to make progress on returning the 737 MAX to service.
Boeing had delivered more than 85 737 MAX aircraft, and 21 airlines have returned their fleets to service. The 737 program was currently producing at a low rate but expects to gradually increase production to 31 per month in early 2022. Boeing still sees near-term pressure from COVID; the next six months should remain challenging for its airline customers. TSA throughput in April was the highest since the pandemic started.
BA continues to expect that narrow body planes (one aisle) will recover quicker than wide body planes (two aisles), which are used more for international flights. Its Defense, Space & Security (DS&S) segment has been resilient. Q1 revs rose 19% yr/yr to $7.19 bln, primarily reflecting higher KC-46A Tanker orders.
While US domestic travel is picking up, BA continues to expect that passenger traffic will not return to 2019 levels until 2023-2024, so investors will need to be patient. There should be improvement in 2021, but it likely will not be dramatic.
Source: Boeing, WSJ
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