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Boeing Reports 3rd-Quarter Earnings

GuruFocus.com
·4 min read

- By Mayank Marwah

American aerospace and defense giant Boeing Co. (NYSE:BA) released its third-quarter earnings results before the opening bell on Oct. 28.

The company reported a better-than-anticipated loss and higher-than-expected revenue for the quarter. Results were down year over year due to lower commercial deliveries and service volume on account of the Covid-19 pandemic.


The key numbers

Boeing reported an adjusted loss of $1.39 per share versus the expected loss of $2.52. The company recorded a net loss of $466 million, translating to a GAAP loss of 79 cents per share.

The company booked revenue of $14.1 billion, down 29% from the same quarter last year. Analysts had expected the metric to be around $13.9 billion.

In a statement, President and CEO Dave Calhoun commented on the challenges posed by the pandemic:


"The global pandemic continued to add pressure to our business this quarter, and we're aligning to this new reality by closely managing our liquidity and transforming our enterprise to be sharper, more resilient and more sustainable for the long term. Our diverse portfolio, including our government services, defense and space programs, continues to provide some stability for us as we adapt and rebuild for the other side of the pandemic."



He also provided an update on the 737 Max:


"Following the lead of global regulators, Boeing made steady progress toward the safe return to service of the 737 MAX, including rigorous certification and validation flights conducted by the U.S. Federal Aviation Administration, Transport Canada and the European Union Aviation Safety Agency.The 737 MAX has now completed around 1,400 test and check flights and more than 3,000 flight hours as it progresses through the robust and comprehensive certification process."



The company ended the quarter with a backlog of $393 billion, which includes more than 4,300 commercial airplanes.

Segment performance

In the commercial segment, Boeing delivered 28 planes against 62 delivered in the same period a year ago. Revenue from the commercial division came in 56% lower at $3.6 billion on the back of lower delivery volume. The operating margin was -38.1%, down from -0.5% reported last year, as the company incurred abnormal production expenses to the tune of $590 million associated with the 737 Max. The segment reported a backlog of more than 4,300 aircraft, or $313 billion.

The defense division contributed $6.8 billion in consolidated revenue, which fell 2% as compared to the year-ago period. The pandemic had an adverse impact on derivative aircraft programs, which was partially offset by higher volume across the remainder of the portfolio. The operating margin contracted to 9.2%. The segment reported backlog of $62 billion, 30% of which was from international customers.

The Covid-19 impact

Calhoun believes that aviation demand would take two to three years to recover following the pandemic. International demand for air travel, in particular, has softened, which in turn has weakened the outlook for the company's widebody commercial jets such as the 787 Dreamliner and the 777.

Boeing announced earlier this year that it would trim as much as 10% of its workforce by way of buyout packages and involuntary termination, citing production slowdown and weak air travel demand. Nearly 19,000 employees are slated to leave the company this year. Given the prolonged demand slump, the company said it would focus on trimming costs.

Update on production

The 737 production rate will be increased to 31 per month by the start of 2022. The company's previous forecast stated it would produce the same amount of planes per month in 2021. The company will drop the 787 production rate to six per month from 10 per month. Boeing added that it would consolidate 787 production in 2021 at a single plant in North Charleston, South Carolina. The 777/777X production rate will be reduced to a combined two per month in 2021.

Guidance

Boeing did not provide any financial forecasts due to uncertainty regarding the pandemic.

Disclosure: I do not hold any positions in the stocks mentioned.

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This article first appeared on GuruFocus.