Boeing (BA) reported third quarter earnings on Wednesday that missed consensus expectations, as fallout from the aerospace giant’s idled 737 Max plane continued to weigh on results.
Here were the numbers for Boeing’s third quarter, compared to Bloomberg-compiled estimates:
Revenue: $20 billion vs. $19.65 billion expected
Adj. earnings per share: $1.45 vs. $2.17 expected
However, Bloomberg said Boeing’s core earnings and revenue may not compare with estimates.
The grounding of the 737 Max jet, linked to 2 deadly crashes, cost Boeing another $900 million during the third quarter. It brought the total to $9.2 billion, though Boeing cited a boost in Q3 from higher defense and services revenue that helped offset losses from its flagship plane.
The company insisted that its base-case scenario involves getting the 737 Max back in the air sometime before year’s end — even as it saw the departure of a high-ranking executive this week amid more questions about whether Boeing misled regulators about the plane’s woes.
“Our top priority remains the safe return to service of the 737 MAX, and we’re making steady progress,” CEO Dennis Muilenburg said in a statement. “We’ve also taken action to further sharpen our company’s focus on product and services safety, and we continue to deliver on customer commitments and capture new opportunities with our values of safety, quality and integrity always at the forefront.”
Underscoring its commitment to the embattled plane, Boeing also plans to gradually increase the 737 production rate from 42 per month to 57 per month by late 2020, it said.
The list of issues surrounding the 737 Max jets continues to grow. On Tuesday, Boeing said that it conducted more than 800 flights with updated 737 Max software, adding that it conducted a “dry run” of a Max certification flight test last week.
However, Boeing also announced that Kevin McAllister, head of the jetliner division, is stepping down and will be replaced by Stan Deal, head of Boeing’s global services business. Deal is someone with extensive sales and supplier-management experience and is seen as an executive that could help Boeing deal with one of the biggest crises in its more than 100 year history.
McAllister’s departure is the first high-level departure since the start of the 737 Max crisis. The news comes on the heels of an announcement on October 11 that Muilenburg would be stripped of his chairman title, and a Wall Street Journal report suggested Boeing may not have been honest with regulators about the plane’s troubles.
The stock, a Dow (^DJI) component, was volatile in pre-market action, falling by more than 1% before recovering. Boeing’s shares may weigh on blue-chip stocks at the opening bell, given that fellow bellwether Caterpillar also missed expectations.
Boeing’s third-quarter results come after the industrial giant posted a larger-than-expected profit loss during the second quarter. During Q2, Boeing’s commercial airplane deliveries fell 54% to 90 airplanes, down from 194 deliveries in the same period last year.
A week before the company released second quarter earnings, it announced that it will be taking a $5.6 billion pre-tax, $4.9 billion post-tax, hit from the 737 MAX jet woes. The charge includes what Boeing estimates it would have to pay airline customers for groundings and delivery delays.
Additionally, Boeing also said that the cost to produce the 737 MAX jets will increase by $1.7 billion in the second quarter.
It is expected that until the 737 Max jets are able to fly again, Boeing’s financial performance will continue to take a hit.
While the main question will revolve around when the company estimates the 737 Max jet will be cleared to fly again, investors will also focus on the ballooning supply of new 737 Max planes that are being produced at a facility near Seattle. Boeing has reduced production by about 19%, but trimming production even further would seriously harm suppliers. It is estimated that about 335 brand new 737 Max planes are being stored in San Antonio.
Muilenburg is headed to Capitol Hill next week to testify before lawmakers. He will be facing the House Transportation committee on Wednesday and is expected to be grilled about the 737 Max jet’s design and certification process of the planes.
Since the Ethiopian Air crash on March 10, the stock has tumbled more than 19%, while the Dow rose nearly 7% during the same time period.
Boeing’s conference call with management kicks off at 10:30 a.m. ET.
Heidi Chung is a reporter at Yahoo Finance. Follow her on Twitter: @heidi_chung.
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