Boeing Reports Significant Loss Due To Continued 737 MAX Fallout

Boeing Co BA posted a core loss per share of $5.82 for the second quarter of 2019. Despite the substantial fall-out from two fatal 737 MAX crashes, analysts expected the company to stay positive and post earnings per share (EPS) of $1.96. 

The aerospace giant attributed the loss directly to the 737 MAX charge, which accounted for a $5.6 billion reduction in revenue and reduced EPS by $8.74. The company posted EPS of $3.16 for the first quarter of 2019 and $3.33 for the second quarter of 2018. 

The company also took a hit from lower 737 deliveries, according to its earnings release.

"The previously issued 2019 financial guidance does not reflect 737 MAX impacts. Due to the uncertainty of the timing and conditions surrounding return to service of the 737 MAX fleet, new guidance will be issued at a future date," the release reads. 

Boeing's 737 MAX aircraft have been grounded globally since mid-March. Since then, International Consolidated Airlines Group (IAG) has issued a vote of confidence in the aircraft manufacturer, agreeing to purchase 200 MAX aircraft for delivery between 2023 and 2027. During that same time frame, however, the company has also lost existing orders for the model.

"Boeing is working very closely with the FAA [Federal Aviation Administration] on the process they have laid out to certify the 737 MAX software update and safely return the MAX to service," according to the release. "Disciplined development and testing is underway and we will submit the final software package to the FAA once we have satisfied all of their certification requirements. Regulatory authorities will determine the process for certifying the MAX software and training updates as well as the timing for lifting the grounding order."

Boeing's revenue also missed expectations, coming in at $15.8 billion, almost $5 billion lower than analysts' expected $20.45 billion. This was also attributed to the 737 MAX charge.

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The company's second quarter operating cash flow was in the red, coming in at ($0.6) billion in the second quarter, which the company said was due to lower 737 deliveries and production rate, as well as timing of receipts and expenditures.

During the quarter, the company paid dividends of $1.2 billion, reflecting a 20 percent increase in dividends per share compared to the same period last year.

"This is a defining moment for Boeing and we remain focused on our enduring values of safety, quality and integrity in all that we do, as we work to safely return the 737 MAX to service," said Boeing chairman, president and CEO Dennis Muilenburg. "During these challenging times, teams across our enterprise continue to perform at a high level while delivering on commitments and capturing new opportunities driven by strong, long-term fundamentals."    

Boeing saw an increase in cash and investments in "marketable securities," coming in at $9.6 billion, up from $7.7 billion at the beginning of the quarter. Marketable securities largely consist of deposits due within one year classified as "short-term investments."

The company's backlog sat at $474 billion at the end of the quarter, including $9 billion in net orders.

Boeing's global services segment, however, saw growing revenues and an increase in earnings from the operation. The segment's second quarter revenues came in at $4.5 billion, up from $4.1 billion during the same quarter last year. Operating margin was relatively stable at 15.1 percent.

The company attributed the revenue gain to the acquisition of Boeing Distribution Services, formerly known as KLX.

During the quarter, the global services segment was awarded performance-based logistics contracts for AH-64 Apache helicopters for the U.S. Army and KC-767A tankers for the Italian Air Force. At the Paris Air Show, Global Services signed commitments with ASL Aviation Holdings and GECAS for up to 45 737-800 converted freighters and announced digital solution agreements with Delta Air Lines and JetBlue Airways.

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Boeing's defense, safety and security division also saw growing revenues, coming in at $6.6 billion compared to $6.1 billion in the second quarter of 2018. The company attributed the growth to higher volume across derivative aircraft, satellites and weapons.

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As expected, the company's commercial airplanes segment is where the numbers get dicey. This segment's revenues came in at $4.7 billion, down from $13.9 billion year-over-year. This, again, is the result of the 737 MAX charge and lower 737 deliveries. 

During the quarter, this segment delivered 90 airplanes, including 42 787s, and captured orders for two 777 freighters for DHL and six 767 freighters for FedEx. 

This segment's backlog houses more than 5,500 airplanes valued at $390 billion.

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The company is expected to issue new guidance reflecting the 737 MAX charge, but the timeline for that guidance is not clear.

Boeing's stock was down 0.55 percent about half an hour after the market opened Wednesday.

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