Boeing, absorbing billions in write-downs related to two of its newest commercial jets and a military fuel tanker, has reported its first quarterly loss in nearly seven years.
Yet revenue for the Chicago aerospace giant rose 1 per cent to US$24.8 billion, and company shares rose steadily before the opening bell Wednesday.
Charges totalling $3bn before taxes, led to Boeing’s first down quarter since the third quarter of 2009, when it lost $1.6bn.
Boeing also lowered its full-year earnings to the range of $6.10 and $6.30 per share, from $8.15 and $8.35. The revenue outlook remains the same at $93bn to $95bn.
The report of a quarterly loss comes days after one of Boeing’s key suppliers, Rockwell Collins, publicly called out the company for being behind on $30 million to $40m in bills for various electronic and cockpit equipment.
“Boeing is delinquent and Boeing has contributed to some of our underperformance here this quarter in cash flow, which is disappointing, but we’re working that with them,” the Rockwell Collins chief executive Kelly Ortberg said on Monday when the company posted earnings.
The Boeing reported losses of $234m on Wednesday. The adjusted per-share loss was 44 cents, which was better than Wall Street had expected. Analysts surveyed by Zacks Investment Research had projected a loss of 88 cents per share. Boeing had already warned analysts of the heavy charges for the quarter, giving them time to adjust their estimates.
The charges this quarter include a $1.2bn write-down, before taxes, on its 747-8. Boeing attributed the loss to weakness in the air cargo market, saying that the overall number of freighter jets produced will be lower than originally estimated. The company will continue to manufacture one of the giant jets every two months but no longer has plans to double the production rate to one per month in 2019.
Boeing also decided against spending money to refurbish and sell its two remaining 787 Dreamliner test aircraft. The jets were built in 2009 and both have spent more than 6,700 hours in flight and ground testing. That charge reached $1.2bn before taxes.
Finally, Boeing took another write-off on the US air force’s KC-46 Pegasus Tanker, a midair refuelling plane Boeing is building off its commercial 767 jet frame. Problems were found during recent test flights and Boeing is working to fix them. The air force was supposed to take delivery of 18 tankers by August 2017 but the new schedule now targets January 2018. The delay and changes will cost Boeing $354m before taxes, on top of more than $1bn in charges already taken on the tanker.
“The underlying operating performance of the company remains solid with our commercial and defence teams again delivering strong revenues and operating cash flow. Actions taken during the quarter that impacted our earnings were the right, proactive steps to reduce risk and strengthen our position for the future,” said the chief executive Dennis Muilenburg.
The increased revenue mostly came from faster production of Boeing’s commercial planes. The commercial division accounts for about two thirds of the company’s revenue, with its defence and space divisions making up the rest.
Boeing takes a deposit when a jet order is made but does not collect the bulk of the cash until a jet is delivered. The company delivered 199 commercial jets during the quarter, up from 197 during the same period last year and 181 two years ago.
The company repurchased 15.3 million shares for $2bn over the quarter. Boeing also paid $691m in dividends, reflecting an approximately 20 per cent increase in dividends per share compared with the same period the prior year.
“For the stock, 2016 has seemed like a ‘transition year’ since management delivered disappointing BCA margin guidance” in January, said Seth Seifman, an aerospace analyst at JP Morgan, in reference to Boeing’s commercial airplane division last week. The spate of writedowns “do not change that narrative”.
The shares rose 2.8 per cent to $138.68 in early morning trading in New York.
Prior to that, shares have fallen almost 7 per cent since the beginning of the year, while the Standard & Poor’s 500 index has increased 6 per cent.
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