Boeing’s strong earnings draw negative review from investors

By Janel Forte

Boeing Co. headquarters in downtown Chicago.
Boeing Co. headquarters in downtown Chicago.

Aerospace giant Boeing Co. reported stronger-than-expected third quarter earnings Wednesday, bolstered by a surge in commercial aircraft demand and increased profitability in its defense ventures.

In the latest quarter the Chicago-based company earned net income of $1.36 billion or $1.86 per diluted share, compared to $1.61 billion, or $1.51 per share in the year ago quarter. Revenues also rose 7.5 percent to $23.78 billion from $22.13 billion in the previous years quarter.

Excluding special items, Boeing said its “core” earnings per share increased by 19 percent to $2.14 per share, up from $1.80 per share in the year ago quarter. The adjusted results easily topped the $1.98 per share analysts polled by Yahoo! Finance projected.

Boeing chief operating officer Jim McNerney commented, “Continued strong operating performance across our production and services businesses drove significant growth in earnings-per-share, and enabled us to continue to capture new business pushing our order backlog to a record $490 billion.”

In Boeing’s commercial group, sales climbed 15 percent to $16.11 billion from $13.99 billion in the year ago period. Earnings rose 11 percent to $1.8 billion from $1.6 billion in the same quarter last year.

Boeing delivered 186 commercial airplanes in the quarter, up 9 percent from 170 in the year ago quarter. The company also gained 501 net orders, extending its commercial backlog to $430 billion for over 5,500 commercial aircraft.  Although Boeing’s European rival, Airbus, also has an extensive backlog of commercial jet orders, Boeing’s order rate trumps its rival in orders placed this year.

Boeing’s strong performance reflects an uptick in the commercial airline industry, both domestically and internationally.  As their business strengthens, many carriers have opted to update their fleets to more fuel-efficient and technologically savvy aircraft.  In the latest quarter Boeing launched production of the mid-range 737 MAX 200, the fourth generation of the 737 family, which has a soaring demand in Asia’s commercial airplane market.

Boeing’s costly and sometimes problem-plagued 787 fuel-efficient wide-body continues to ascend in sales, with the company delivering 31 this quarter. Boeing also said the new wide-body design it announced last month, the long-range 777X, has received 300 orders to date with a projected first delivery for 2020.

Sales for Boeing’s defense group fell 2 percent to $7.91 billion from $8.05 billion in last year’s third quarter. Even though revenues saw a decrease, earnings at the group rose 27 percent to $856 million from $673 million in the year ago period.

In its defense sector this quarter, Boeing was awarded a contract for NASA’s Commercial Crew program to build “space taxis” and received its first order for the 502 Phoenix small satellite. Additionally, the company delivered 47 defense aircraft and one satellite. The orders placed during the quarter are valued at $4 billion, increasing the defense backlog to $60 billion.

Despite the earnings upturn, Boeing’s results received a hostile reception from Wall Street: in New York Stock Exchange trading, Boeing shares nose-dived, falling $5.67, or 4.5 percent, to close at $121.45.

Although Boeing’s numbers looked as if it contained positive news, said Morningstar analyst Neal Dihora, there is still room for concern.

“The cash flow stuff is problematic,” he said. “Right now, they’re boggled up by inventory with their extensive backlog – but when will growth and sales ever really mean anything to their bottom line?”