Boeing Defense, Space, and Security Segment Dips in 2Q15
An Analysis of the Boeing Company’s 2Q15 Results
2Q15 performance analysis
The overall revenues for the Boeing (BA) Defense, Space, and Security segment fell by 3% year-over-year to $7.5 billion for 2Q15. This was primarily due to a 8% year-over-year fall in the company’s Global Services and Support division and the pre-tax charges on the KC-46 tanker program. The backlog for the segment stood at $58 billion, 39% of which came from international customers.
The earnings at the Boeing Military Aircraft division was $3.48 billion, driven by planned timing of deliveries and the awarding of contracts for six C-17 Globemaster III airlift aircraft. However, its earnings fell by 25% year-over-year to $123 million for 2Q15.
The Network and Space Systems (N&SS) division received NASA’s first commercial contract for a human spaceflight mission as part of its existing commercial crew contract. The segment’s revenues grew marginally to $1.9 billion and its operating margin was unchanged at 7.8%.
Lower volume in aircraft modernization and sustainment lowered the division’s revenues to $2.1 billion. The division was also awarded an F-15 international services contract extension during the quarter.
Defense, Space, and Security segment overview
The Boeing Defense, Space, and Security segment designs, produces, modifies, and supports military fixed-wing aircraft, rotorcraft, weapons, and satellite systems. It is divided into three capability-driven businesses:
Boeing Military Aircraft (or BMA): This business involves the production and development of manned and unmanned military weapons systems for mobility, strikes, airborne surveillance, and reconnaissance.
Network and Space Systems (or N&SS): This business creates products and services related to Boeing’s electronics, strategic missiles, information, intelligence systems, defense, and space.
Global Services and Support (or GS&S): This business offers a range of products and services through integrated logistics, including supply chain management and engineering support, maintenance, modification and upgrades for aircraft, asset management solutions, training systems for pilots, aircraft platforms, and maintenance crews.
Boeing’s major customer in this segment is the United States government. For these orders, it must compete with players like Lockheed Martin (LMT), Raytheon (RTN), General Dynamics (GD), Northrop Grumman (NOC), and United Technologies (UTX). The Industrial Select Sector SPDR ETF (XLI) has a 4.86% exposure to Boeing stock.
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