Boeing Swings to Loss, but Results Still Top Views -- Update
July 27 2016 - 1:06PM
Dow Jones News
By Jon Ostrower
Boeing Co. swung to its first quarterly loss in nearly seven
years, as it looks to move past blunders developing new products
over the past decade.
The disappointing results come about a week after the world's
largest plane maker said it would take $3 billion of costly charges
to three important airplane programs. The charges to the Boeing's
advanced 787 Dreamliner, iconic 747 jumbo jetliner and its new
aerial refueling tanker were largely expected, but underscore the
challenges still facing some crucial projects.
The loss marks the completion of a bumpy first year on the job
for Boeing's new chief executive, Dennis Muilenburg. Shares have
fallen roughly 3.5% since Mr. Muilenburg took over the top spot in
July 2015.
The advanced Dreamliner program has been the most costly for
Boeing over the years, with the company forced to spend tens of
billions of dollars more than first anticipated, with the latest
bill for production at $27.7 billion. The company said it would
begin to make money on each delivery by the end of the year but
only after having built around 500 aircraft since 2011, or around
40% of its orders.
Boeing reported a loss of $234 million, or 37 cents a share,
compared with a year-earlier's profit of $1.1 billion, or $1.59 a
share, a year earlier. Revenue rose 1% to $24.8 billion.
However some metrics managed to beat analyst expectations.
Adjusted "core earnings" loss that excludes certain pension
expenses and is closely watched by the market came in better than
expected, helping to lift Boeing shares 1.9% at $137.88 in midday
trading.
The results were the second consecutive quarter weighed down by
the jumbo jetliner and the tanker program. Boeing last posted a
quarterly loss in 2009 after hefty pretax charges.
On Wednesday, the company revised its annual earnings per share
guidance to $6.40 to $6.60, from a range of $8.45 to $8.65 per
share. It left its closely watched cash flow guidance unchanged at
roughly $10 billion.
As older development programs continue to weigh on its finances,
Boeing's aerial tanker, its biggest defense program, is more than
40% past its original budget.
Boeing added $243 million to its development bill in the first
quarter in an effort to keep the program on schedule, only to add
$573 million more with new delays with its most recent charge. The
company announced in May first deliveries to the U.S. Air Force
were stalled by five months due to design and production
issues.
Boeing last week completed early aerial trials refueling
aircraft from the U.S. Air Force, Navy and Marines, clearing the
way for a purchase decision in August by the Department of Defense.
The company still faces a battery of tests to complete the tanker
over the next year.
Despite the losses, the company continued to spend $2.7 billion
on share buybacks and quarterly dividends during the quarter. Some
analysts caution that its rampant share buybacks aren't adequately
budgeting for future development woes, a market downturn or
committing to an all-new jetliner.
The aerospace giant is nearing important points in programs that
make up the overwhelming majority of the company's commercial
profitability. Boeing said it would introduce next year an updated
model of its best-selling single-aisle 737 Max jet and begin
production of its long-range 777X jetliner to airlines. The latter
plane would hold 350 to 400 seats.
Before this happens, Boeing must ensure it can continue
production largely unabated. Sales of large twin-aisle jetliners
have sagged over the past year, with both Boeing and Airbus adding
just a handful of new orders for big jets.
--Joshua Jamerson contributed to this article
Write to Jon Ostrower at jon.ostrower@wsj.com
(END) Dow Jones Newswires
July 27, 2016 12:51 ET (16:51 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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