Boeing on Wednesday reported big drops in sales and earnings in its third quarter as it continues to struggle with the grounding of its 737 MAX passenger plane, which it expects to return to service later this year.
The safe return to service of the 737 MAX, which suffered two tragic crashes in the past year, remains the company’s top priority, Dennis Muilenburg, Boeing’s president and CEO, said on the company’s earnings call.
Net income in the quarter fell 51% to $1.2 billion, $2.05 earnings per share (EPS), from $2.4 billion ($4.07 EPS) a year ago. Core earnings, which excludes pension cost adjustments, were $1.45 EPS versus consensus estimates of $2.07 EPS.
Sales slid 21% to $20 billion from $25.1 billion a year ago.
The top and bottom lines were weighed down by Boeing’s Commercial Airplanes segment due to a steep drop in aircraft deliveries, 62 versus 190 a year ago, and an estimated $900 million increase in 737 MAX costs related to the timing of return to service and planned production rate increases.
Boeing’s Defense segment swung to a $755 million operating profit versus a $247 million loss a year ago when it took charges of $691 million related to planned investments in two marquis programs it had just won–the Air Force T-X trainer and Navy MQ-25 unmanned aerial refueling tanker–and a $64 million charge related to cost growth on the Air Force KC-46 tanker program. Segment operating margin was 10.7 percent.
Defense segment sales were up 2 percent to just over $7 billion. The segment won $5 billion in contract awards during the quarter. However, the Air Force has terminated Boeing’s $349 million technology-maturation contract for the next-generation Ground-Based Strategic Deterrent (GBSD) intercontinental ballistic missiles nearly a year before its scheduled end. Boeing has already said it would not compete against rival Northrop Grumman for the GBSD production contract, which could be worth up to $25 billion.
There are $2.5 trillion in opportunities in the defense and space market over the next decade for Boeing to pursue, with 40 percent of the potential business from international customers, Muilenburg said.
The segment’s backlog at the end of the quarter stood at $61.7 billion, up 8 percent from $61.3 billion at the end of 2018. International customers account for 30 percent of the backlog.
Boeing’s overall backlog at the end of the quarter stood at $470.2 billion, down 4 percent from $490.5 billion at the end of 2018 due solely to a decline at Commercial Airplanes. Free cash was a $2.9 billion outflow in the quarter.
This story first appeared in Nuclear Security & Deterrence Monitor affiliate publication Defense Daily.
