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Boeing (BA) Incurs Loss in Q2 Hit by Charges, Guides Down
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Aerospace giant The Boeing Company (BA - Free Report) incurred an adjusted loss of 44 cents per share in second-quarter 2016. The loss was, however, much narrower than the Zacks Consensus Estimate of a loss of 88 cents.
The quarterly number reflects after-tax charges in relation to three separate programs: the 787, the 747 and the KC-46 tanker aircraft program.
The bottom line plunged 127% year over year from earnings of $1.62 per share a year ago, owing to a 787 cost reclassification ($1.33 per share), and charges on the 747 ($1.28 per share) and the KC-46 Tanker (62 cents per share) programs.
On a GAAP basis, Boeing reported a loss of 37 cents per share, in stark contrast to earnings of $1.59 per share in the year-ago quarter.
The company's revenues increased 1% year over year to $24.76 billion in the reported quarter. The reported figure was also ahead of the Zacks Consensus Estimate of $24.45 billion.
Total Backlog
Backlog at the end of the second quarter declined to $472.2 billion from $489.3 billion at 2015 end. Reported backlog included $17 billion of net orders during the quarter.
Quarterly Segment Results
Commercial Airplane Segment: The segment saw 3% growth in revenues to $17.46 billion on higher delivery volume. Operating margin contracted 1,270 basis points (bps) year over year that reflected a previously announced R&D reclassification of $1,235 million on the 787 program, a pre-tax charge of $1,188 million on the 747 program, and a pre-tax charge of $354 million on the KC-46 Tanker program.
Boeing’s commercial deliveries of 199 airplanes increased 1% in the second quarter driven by higher demand for its 777 and 787 Dreamliners. Sequentially, deliveries showed a 13.1% uptick. However, deliveries of its single-aisle 737, its most popular plane, slipped to 127 in the second quarter from 128 a year ago as it was busy with a newer version, the 737 MAX.
Shipments for 777 and 787 Dreamliners were 28 and 38 compared with 26 and 34 in the year-ago period, respectively. For the 747 and 767 jets, the company’s deliveries were a respective 2 and 4 in the quarter, compared with 5 units of 747s and 4 units of 767s in the year-ago quarter.
Boeing won net orders for 152 planes in the Jun 2016 quarter with backlog reaching 5,700 airplanes valued at $417 billion.
Boeing Defense, Space & Security (BDS): The segment witnessed an approximately 5% year-over-year decrease in its quarterly revenues to $7.17 billion. Revenues for two of the three sub-segments – Boeing Military Aircraft (BMA) and Network & Space Systems (N&SS) – recorded year-over-year declines of 14% and 7%, respectively. Global Services & Support (GS&S) witnessed 12% year-over-year revenue growth.
Quarterly operating margin, however, expanded 110 bps year over year to 8.3%.
Backlog at BDS was $55 billion, 37% of which comprised orders from international clients.
In the defense and space business, Boeing’s deliveries numbered 45 in the second quarter of 2016, compared with 56 a year ago and 50 in the preceding quarter. Total deliveries in the quarter consisted of 15 AH-64 Apache helicopters (both new and remanufactured) and 14 Chinook helicopters (new and renewed). The company also delivered 6 F/A-18 jets, 5 P-8 models, 3 F-15s, 1 C-17 Globemaster III and 1 Commercial and Civil Satellite.
Boeing Capital Corporation (BCC): Boeing Capital reported quarterly revenues of $84 million compared with $115 million in the year-ago quarter. The segment’s earnings were $18 million compared with $11 million a year ago.
At the end of the second quarter, BCC's portfolio balance was $3 billion, down from the beginning of the quarter.
Financial Condition
Boeing ended the second quarter with cash and cash equivalents of $8.61 billion and short-term investments of $660 million. At year-end 2015, the company had $11.30 billion of cash and cash equivalents and $750 million of short-term investments. Long-term debt was $9.85 billion in the second quarter, up from $8.73 billion at 2015 end.
The company generated $3.23 billion of operating cash flow in the quarter, down 2% year over year. Free cash flow was $2.56 billion in the quarter as against free cash of $2.61 billion a year back.
Guidance
Boeing lowered its adjusted or core earnings per share expectation to the range of $6.10–$6.30 from $8.15−$8.35 expected earlier for 2016. GAAP earnings are now expected in the range of $6.40–$6.60 per share versus $8.45-$8.65 projected earlier.
The company, however, maintained its 2016 revenue guidance in the range of $93−$95 billion.
Commercial Airplanes' 2016 delivery expectations are in the band of 740−745 airplanes with revenues projected in the $64−$65 billion range. Operating margin is now expected in the 4.5%-5.0% range (versus 9%).
The company maintained 2016 defense revenues in the $28.5 billion to $29.5 billion range and operating margin of approximately 10%.
Boeing Capital Corp. expects its aircraft finance portfolio to remain stable. The company expects segment revenues to approximate $0.3 billion.
Boeing's 2016 R&D forecast is now approximately $4.5 billion (versus $3.6 billion). Capital expenditures for 2016 are expected to be $2.8 billion.
Zacks Rank
Boeing currently holds a Zacks Rank #3 (Hold).
At the Peers
Pentagon’s prime contractor, Lockheed Martin Corp. (LMT - Free Report) , reported second-quarter 2016 earnings of $3.32 per share, surpassing the Zacks Consensus Estimate of $2.92 by 13.7%. Earnings also increased 12.9% from the year-ago level.
Northrop Grumman (NOC - Free Report) reported second-quarter 2016 adjusted earnings of $2.60 per share, beating the Zacks Consensus Estimate of $2.50 by 4%. Earnings also jumped 5.3% from $2.47 earned in the year-ago quarter.
General Dynamics Corporation (GD - Free Report) announced second-quarter 2016 earnings from continuing operations of $2.44 per share, beating the Zacks Consensus Estimate of $2.30 by 6.1%.
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Boeing (BA) Incurs Loss in Q2 Hit by Charges, Guides Down
Aerospace giant The Boeing Company (BA - Free Report) incurred an adjusted loss of 44 cents per share in second-quarter 2016. The loss was, however, much narrower than the Zacks Consensus Estimate of a loss of 88 cents.
The quarterly number reflects after-tax charges in relation to three separate programs: the 787, the 747 and the KC-46 tanker aircraft program.
The bottom line plunged 127% year over year from earnings of $1.62 per share a year ago, owing to a 787 cost reclassification ($1.33 per share), and charges on the 747 ($1.28 per share) and the KC-46 Tanker (62 cents per share) programs.
On a GAAP basis, Boeing reported a loss of 37 cents per share, in stark contrast to earnings of $1.59 per share in the year-ago quarter.
Revenues
The company's revenues increased 1% year over year to $24.76 billion in the reported quarter. The reported figure was also ahead of the Zacks Consensus Estimate of $24.45 billion.
Total Backlog
Backlog at the end of the second quarter declined to $472.2 billion from $489.3 billion at 2015 end. Reported backlog included $17 billion of net orders during the quarter.
Quarterly Segment Results
Commercial Airplane Segment: The segment saw 3% growth in revenues to $17.46 billion on higher delivery volume. Operating margin contracted 1,270 basis points (bps) year over year that reflected a previously announced R&D reclassification of $1,235 million on the 787 program, a pre-tax charge of $1,188 million on the 747 program, and a pre-tax charge of $354 million on the KC-46 Tanker program.
Boeing’s commercial deliveries of 199 airplanes increased 1% in the second quarter driven by higher demand for its 777 and 787 Dreamliners. Sequentially, deliveries showed a 13.1% uptick. However, deliveries of its single-aisle 737, its most popular plane, slipped to 127 in the second quarter from 128 a year ago as it was busy with a newer version, the 737 MAX.
Shipments for 777 and 787 Dreamliners were 28 and 38 compared with 26 and 34 in the year-ago period, respectively. For the 747 and 767 jets, the company’s deliveries were a respective 2 and 4 in the quarter, compared with 5 units of 747s and 4 units of 767s in the year-ago quarter.
Boeing won net orders for 152 planes in the Jun 2016 quarter with backlog reaching 5,700 airplanes valued at $417 billion.
Boeing Defense, Space & Security (BDS): The segment witnessed an approximately 5% year-over-year decrease in its quarterly revenues to $7.17 billion. Revenues for two of the three sub-segments – Boeing Military Aircraft (BMA) and Network & Space Systems (N&SS) – recorded year-over-year declines of 14% and 7%, respectively. Global Services & Support (GS&S) witnessed 12% year-over-year revenue growth.
Quarterly operating margin, however, expanded 110 bps year over year to 8.3%.
Backlog at BDS was $55 billion, 37% of which comprised orders from international clients.
In the defense and space business, Boeing’s deliveries numbered 45 in the second quarter of 2016, compared with 56 a year ago and 50 in the preceding quarter. Total deliveries in the quarter consisted of 15 AH-64 Apache helicopters (both new and remanufactured) and 14 Chinook helicopters (new and renewed). The company also delivered 6 F/A-18 jets, 5 P-8 models, 3 F-15s, 1 C-17 Globemaster III and 1 Commercial and Civil Satellite.
Boeing Capital Corporation (BCC): Boeing Capital reported quarterly revenues of $84 million compared with $115 million in the year-ago quarter. The segment’s earnings were $18 million compared with $11 million a year ago.
At the end of the second quarter, BCC's portfolio balance was $3 billion, down from the beginning of the quarter.
Financial Condition
Boeing ended the second quarter with cash and cash equivalents of $8.61 billion and short-term investments of $660 million. At year-end 2015, the company had $11.30 billion of cash and cash equivalents and $750 million of short-term investments. Long-term debt was $9.85 billion in the second quarter, up from $8.73 billion at 2015 end.
The company generated $3.23 billion of operating cash flow in the quarter, down 2% year over year. Free cash flow was $2.56 billion in the quarter as against free cash of $2.61 billion a year back.
Guidance
Boeing lowered its adjusted or core earnings per share expectation to the range of $6.10–$6.30 from $8.15−$8.35 expected earlier for 2016. GAAP earnings are now expected in the range of $6.40–$6.60 per share versus $8.45-$8.65 projected earlier.
The company, however, maintained its 2016 revenue guidance in the range of $93−$95 billion.
Commercial Airplanes' 2016 delivery expectations are in the band of 740−745 airplanes with revenues projected in the $64−$65 billion range. Operating margin is now expected in the 4.5%-5.0% range (versus 9%).
The company maintained 2016 defense revenues in the $28.5 billion to $29.5 billion range and operating margin of approximately 10%.
Boeing Capital Corp. expects its aircraft finance portfolio to remain stable. The company expects segment revenues to approximate $0.3 billion.
Boeing's 2016 R&D forecast is now approximately $4.5 billion (versus $3.6 billion). Capital expenditures for 2016 are expected to be $2.8 billion.
Zacks Rank
Boeing currently holds a Zacks Rank #3 (Hold).
At the Peers
Pentagon’s prime contractor, Lockheed Martin Corp. (LMT - Free Report) , reported second-quarter 2016 earnings of $3.32 per share, surpassing the Zacks Consensus Estimate of $2.92 by 13.7%. Earnings also increased 12.9% from the year-ago level.
Northrop Grumman (NOC - Free Report) reported second-quarter 2016 adjusted earnings of $2.60 per share, beating the Zacks Consensus Estimate of $2.50 by 4%. Earnings also jumped 5.3% from $2.47 earned in the year-ago quarter.
General Dynamics Corporation (GD - Free Report) announced second-quarter 2016 earnings from continuing operations of $2.44 per share, beating the Zacks Consensus Estimate of $2.30 by 6.1%.
BOEING CO Price, Consensus and EPS Surprise
BOEING CO Price, Consensus and EPS Surprise | BOEING CO Quote
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