Boeing's Q4 2012 earnings release is out.
A live blog of the earnings conference call at 10:30 AM is below.
The aircraft manufacturer reported earnings of $1.28 per share, better than analysts' estimates of $1.18.
Revenues came in at $22.30 billion, just a hair below the $22.33 expected.
The company sees 2013 earnings in the range of $5.00-5.20 per share versus analysts' estimates of $5.16.
Boeing expects 2013 revenues in the range of $82-85 billion versus estimates of $87.90.
Shares are up slightly in pre-market trading.
The company touched briefly on the Dreamliner crisis in the release:
On January 16, 2013, the Federal Aviation Administration (FAA) issued an airworthiness directive that resulted in all in-service 787s temporarily ceasing operations. The company is committed to working with the FAA and other applicable regulatory authorities to return aircraft to service with the full confidence of customers and the traveling public. While production continues on the 787, the company is suspending deliveries until clearance is granted by the FAA.
Boeing says it expects to deliver more than 60 787s in 2013.
In the release, Boeing CEO Jim McNerney said, “Our first order of business for 2013 is to resolve the battery issue on the 787 and return the airplanes safely to service with our customers. At the same time, we remain focused on our ongoing priorities of profitable ramp up in commercial airplane production, successful execution of our development programs, and continued growth in core, adjacent and international defense and space markets.”
See below for a summary of Boeing management's comments from the earnings call.
10:30 AM ET - Call begins. CEO Jim McNerney and CFO Greg Smith are on the line.
10:32 - Jim: The business outlook is good, and Boeing expects economic conditions to stabilize this year. Boeing led the industry in new orders for aircraft in 2012.
10:34 - Jim: Nearly two-thirds of Boeing's order book is outside the U.S. and Europe. With volatility in fuel prices, customers continue to see accelerated deliveries, while cancellations remain at low levels.
10:35 - Jim: Boeing continues to see strong demand particularly in the Middle East, Brazil, and Asia Pacific.
10:36 - Jim: Although the threat of sequestration looms, Boeing is still seeing solid demand for unmanned systems and cyber-security.
10:39 - Jim: In 2012, Boeing successfully completed five rate increases on its commercial airplane programs.
10:40 - Jim: Boeing is currently producing 5 787s per month. It expects to be able to crank out 7 787s per month by mid-2013 and 10 per month by the end of the year.
10:41 - Jim: Boeing rigorously supports the investigation into Dreamliner malfunctions and is working around the clock to identify the problem. Progress is being made. "We deeply regret the impact this is having on our customers."
10:42 - Jim: Final stage assembly of the new 787-9 is expected in mid-2013. The first customer delivery remains on track for early 2014.
10:46 - Greg: Unprecedented low interest rates have caused a significant increase in non-cash pension management costs. New non-GAAP measures – referred to as "core operating earnings" and "core earnings per share" – will strip those out.
10:49 - Greg: [Greg is running through the financial results, which can be found in Boeing's Q4 earnings release]
10:55 - Greg: Guidance assumes no financial impact from the FAA directive on the Dreamliner investigation. Boeing will inform investors if that changes.
10:58 - Jim: For 2013, our first order of business is obviously getting 787s flying again.
11:00: Q&A begins.
11:00: First question is from Sanford Bernstein. If we were to see an extended delay in 787 deliveries, what would make Boeing consider reducing production rates, and how might this affect the availability of engineering resources for other programs?
11:01 - Jim: That is a highly hypothetical situation. I can't predict an outcome.
11:02 - Sanford Bernstein: Is the problem impacting other development efforts in other product lines?
11:02 - Jim: No, this issue is highly compartmentalized and is not drawing on any critical resources from other growth programs.
11:03: A question from Credit Suisse. What are the parallel paths Boeing is pursuing here; e.g., a software solution versus a more complex electrical change? Also, how much would those paths cost?
11:04 - Jim: The drain on resources from the 787 investigation is not significant. I can't talk about the investigation, but I can assure you there is an ongoing analysis of the root cause, which I'm confident will be identified. "Confidence in the process, confidence in the right resources, and confidence that it's not distracting the balance of Boeing."
11:07: A question from JPMorgan. Cash flow was very strong in Q4 relative to guidance and expectations. What caused that and how does that impact 2013?
11:07 - Greg: There is some pull forward from 2013, and we've been actively managing cash. Also, higher deliveries in Q4. That should continue in 2013 as Boeing ramps up production of commercial aircraft.
11:09: A question from Coen and Co. Is there any reason to think the FAA's approach will change on the 787 from previous investigations?
11:10 - Jim: I don't want to pre-judge what is going to happen.
11:12: A question from BofA Merrill Lynch. How is it going with the 737 MAX, and what should we think about when 787-10 will happen, and what is the timing on the 777X? Also, how do you incrementally evolve a 20-year-old airplane?
11:13 - Jim: MAX development is going very well. We are hitting all of our benchmarks slightly ahead of schedule, and our confidence is growing every day that we will deliver that airplane on time. On the 787-10, we've been conditionally offering the airplane in the marketplace, and the response has been very strong. Very good progress toward that. On the 777X, we are focused on a technical solution that offers significant performance advantages. I think it's been widely discussed that the most likely design is some increased capacity and a composite wing with new engines. "That airplane has eye-watering sorts of performance associated with it." We're getting close to the point where we conditionally offer it to customers.
11:16 - BofA: A composite wing on the 777X is a significant development. There is nothing easy about that, right?
11:17 - Jim: You are correct, it will be a significant amount of work. It's not without challenges, but we are confident.
11:18: A question from Barclays. What will the cadence of 787 deliveries be like throughout the year? Also, for Greg, on the "core EPS" – how are you addressing the sizable liabilities that you are stripping out over the long term?
11:19 - Greg: The 787 deliveries are spread throughout the year. With regard to pension liabilities, it continues to be a primary focus. We've taken action in a number of areas, including our investment strategy. We are continuing to make progress in that area, and the change to "core EPS" does not reduce the significance of that liability.
11:25: Questions from the media. One from the AP: how many batteries have been replaced?
11:26 - Jim: We don't have an exact number. Batteries are replaced on our planes every day. We are unaware of any incidence of battery replacement due to safety concerns – only for routine maintenance. Replacements have been slightly higher than we predicted.
11:27: A question from Reuters. How would a strike by engineers, which seems possible next month, impact the FAA investigation?
11:28 - Jim: That's another hypothetical that is very hard to predict. We're hopeful discussions with the engineers don't come to that. That question hasn't presented itself as a real issue.
11:29: A question from the WSJ. Are supply chains for the 787 too rigid to implement any changes that may arise from the FAA investigation without affecting the rate of production?
11:30 - Jim: We have a bit of a buffer there in our planning.
11:31: A question from CNBC. Is there any consideration of ditching the lithium-ion batteries in the Dreamliner?
11:31 - Jim: Nothing indicates that we made the wrong choice of the battery at this stage.
11:38: Call ends.
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