Boeing Posts $1.56 Bln Loss In Q3; Trims FY09 EPS View - Update2
(RTTNews) - Aerospace and defense giant Boeing Co. (BA | Quote | Chart | News | PowerRating) on Wednesday reported a net loss for the third quarter, hurt by previously-announced charges for delays to the 747-8 Freighter and the 787 Dreamliner programs. Loss from continuing operations for the quarter was wider than analysts' consensus estimate. Revenue, however, increased 9% from a year ago. For fiscal year 2009, the company lowered its earnings outlook to reflect the charges related to the 787 and 747 programs, but reiterated its forecast for full-year revenue.
With soft demand for air travel and freight services, airlines have reduced purchases of new aircraft leading to a decline in orders as well as cancellations. This in turn, has negatively impacted the revenues of plane manufacturers. In addition to the downturn in the economy, Boeing has its own problems. The company's much-awaited, fuel efficient Dreamliner has faced several production glitches and is running behind schedule.
The Chicago, Illinois-based company had announced third-quarter charges totaling $3.5 billion, or $3.59 per share, related to its 747-8 program as well as the much-discussed Dreamliner. Boeing said in early October that it expects a pre-tax charge of about $1.0 billion in the third quarter as higher production costs and difficult market conditions are affecting its 747-8 program. The company had also announced a pre-tax charge of $2.5 billion in the third quarter related to the Dreamliner, as the initial flight-test airplanes have no commercial market value.
Third-Quarter Results
Boeing reported net loss for the third quarter of $1.56 billion, or $2.23 per share, compared to net earnings of $695 million, or $0.96 per share, in the same period last year.
The results for the latest quarter include charges of $2.46 per share related to reclassification to research and development of costs incurred through July for the first three 787 flight-test airplanes, spending on those planes for August and September of $0.14 per share, and a charge related to the 747 program of $0.99 per share. The year-ago quarter's results were impacted by a labor strike and supplier production problems that reduced earnings by an estimated $0.60 per share.
Net loss from continuing operations for the latest quarter was $1.56 billion, or $2.22 per share, compared to net income from continuing operations of $683 million, or $0.94 per share in the year-ago period. On average, sixteen analysts polled by Thomson Reuters expected the company to report loss of $2.12 per share for the quarter. Analysts' estimates typically exclude special items.
Total revenues for the quarter grew 9% to $16.69 billion from $15.29 billion in the prior-year quarter, which was strike affected. Analysts had a consensus revenue estimate of $17.18 billion for the quarter.
Sales of products for the quarter increased to $13.97 million from $12.41 million in the year-ago period, while sales of services declined to $2.72 million from $2.89 million a year ago.
Commenting on the results, Jim McNerney, Chairman, President and Chief Executive Officer of Boeing, said, "The 787 cost reclassification and the 747 charge for increased costs and difficult market conditions clearly overshadowed what continues to be otherwise solid performance across our commercial production programs and defense business. We look forward to getting the 787 and 747-8 in the air soon and moving forward with flight test and certification for these two important programs."
Boeing operates in five segments: Commercial Airplanes, Boeing Military Aircraft, Network and Space Systems, Global Services and Support, and Boeing Capital Corporation.
At Boeing Commercial Airplanes or BCA, third-quarter revenues climbed 13% to $7.88 billion on higher airplane deliveries partially offset by lower services volumes, while revenue for the year-ago period was affected by a labor strike and supplier production problems. Loss from operations for the quarter was $2.84 billion compared to earnings from operations of $394 million in the year-ago period. The loss for the quarter reflects the charges related to the 787 and 747 programs. Boeing is the world's second-largest commercial aircraft maker after Europe's Airbus.
Boeing Integrated Defense Systems or IDS generated revenues of $7.8 billion in the third quarter, up 3% from last year. Earnings from operations for the segment increased 4% from the year-ago period to $885 million. The segment's backlog reduced to $65.8 billion at the end of the quarter primarily due to termination of the manned ground vehicle portion of the Future Combat Systems contract reflecting changing US defense priorities.
Boeing Military Aircraft third-quarter revenue rose 7% from a year ago to $3.95 billion, while earnings from operations climbed 25% to $486 million. During the quarter, BMA delivered 34 aircraft, the third P-8A achieved its first flight, the P-8 India contract was finalized, and the Chinook program received a 15-aircraft contract from Canada.
At Network & Space Systems, quarterly revenues declined 9% from the prior-year quarter to $2.71 billion driven by lower volume on intelligence and security systems, missile defense, and combat systems. Earnings from operations for the segment declined 17% from the prior-year period to $252 million.
Global Services & Support or GS&S revenues increased 15% from the year-ago period to $2.08 billion on higher volume across its broad portfolio of services and logistics products. The segment reported earnings from operations of $147 million, down 10% from the year-ago period.
Boeing Capital Corporation or BCC reported third-quarter pre-tax earnings of $39 million, up 5% from $37 million in the same period last year. Revenue for the quarter declined 3% from a year ago to $166 million.
Total company backlog at quarter-end was $320 billion, down 2% in the quarter, as backlog for both Commercial Airplanes and Integrated Defense Systems declined during the period.
Boeing delivered 113 commercial airplanes in the third quarter, compared to 84 deliveries in the year-ago period. The aircraft that were delivered during the quarter include 90 737 Next Generation airplanes, four 767s and nineteen 777s. For the year-to-date period, the company's commercial airplanes deliveries totaled 359.
In August, Boeing reported a 17% increase in profit for the second quarter, driven by growth in defense programs and strong operating performance in defense and commercial airplanes segments. Net earnings increased to $998 million, or $1.41 per share, from $852 million, or $1.16 per share, reported in the same quarter last year. Total revenues for the quarter increased to $17.15 billion from $16.96 billion in the prior year quarter.
Year-To-Date Results
For the nine months of fiscal year 2009, Boeing's net earnings dropped to $44 million, or $0.06 per share, from $2.76 billion, or $3.76 per share, in the previous-year period. The results for the nine months include charges incurred in the third quarter and a first-quarter charge of $0.38 per share from reductions to future twin-aisle production rates and lower delivery price escalation forecasts in Commercial Airplanes.
Net earnings from continuing operations for the period was $52 million, or $0.07 per share, compared to net earnings from continuing operations of $2.74 billion, or $3.74 per share, in the same period last year.
Revenue for the nine-month period rose 4% to $50.34 billion from $48.25 billion in the year-ago period.
Outlook
Looking ahead, Boeing lowered its earnings outlook for fiscal year 2009 to include the 787 cost reclassification and 747 charge. The company now forecasts earnings in a range of $1.35-$1.55 per share, compared to the prior range of $4.70-$5.00 per share.
The company, however, reiterated its forecast for full-year revenue in a range of $68 billion-$69 billion.
Analysts expect the company to report earnings of $1.54 per share on revenues of $67.83 billion for the year.
Operating cash flow for the year is still expected to be greater than $2.5 billion, including discretionary pension contributions of about $0.5 billion and an assumption of $0.8 billion for new commercial airplane financings.
Commercial Airplanes' 2009 delivery guidance remains at between 480 and 485 airplanes and is sold out. BCA's 2009 revenue is unchanged at between $34 billion and $35 billion, while operating margin is now expected to be between minus 3% and minus 2.5% due to the 787 and 747 impacts. Earlier, the company had forecast operating margin between 8% and 8.5%.
IDS guidance for 2009 remains unchanged with revenue between $33 billion and $34 billion and operating margins of about 10%.
Boeing Capital Corp. now expects that the aircraft finance portfolio will be stable as the amount of new aircraft financing in 2009 will approximate normal portfolio runoff due to customer payments and depreciation. Earlier, the aircraft finance portfolio was expected to increase modestly as the amount of new aircraft financing in 2009 was forecast to exceed normal portfolio runoff due to customer payments and depreciation.
Boeing raised its 2009 R&D forecast to a range of $6.6 billion and $6.8 billion, up from the prior range of $3.6 billion-$3.8 billion, driven by the 787 cost reclassification, an operating model adjustment to better balance BCA R&D efforts, and higher IDS R&D.
Capital expenditures for the year are now expected to be about $1.3 billion, down from the prior expectation of approximately $1.4 billion. The company continues to expect non-cash pension expense of about $0.9 billion in 2009.
The company said today that the 787 program has begun the previously announced reinforcement to an area within the side-of-body joint. First flight of the airplane remains on track to occur by the end of 2009, with first delivery scheduled for the fourth quarter of 2010, the company said. Total firm orders are now 840 airplanes from 55 customers, including the previously disclosed ten-unit cancellation that occurred after the end of the quarter.
In early October, Boeing had announced a delay in the first flight and first delivery of its 747-8 Freighter. The company currently expects first flight of the 747-8 Freighter to occur by early next year with the flight test program taking place in 2010. First delivery of the 747-8 Freighter is now expected in the fourth quarter of 2010. The company's previous schedule for the delivery of the first 747-8 Freighter was the third quarter of 2010.
Boeing said in late September that has received the draft request for Proposals, or RFP, for the KC-X Tanker competition from the U. S Air Force for aerial refueling tankers. The contract is for a new fleet of 179 tanker aircraft valued at about $35 billion, with Boeing and a joint Northrop Grumman Corp. (NOC | Quote | Chart | News | PowerRating), and Airbus team being the major contenders. The contract is one of the largest military deals ever awarded and could be extended for decades and eventually cost $100 billion for 400 to 500 of the planes.
The Air Force expects to announce the contract by mid-2010, and the delivery of the planes is expected to begin in 2015. Each bidder must meet 373 mandatory requirements for the new tanker, as specified by the Pentagon, to qualify for the bidding process.
Peer Performance
Boeing's larger rival in the defense sector, Lockheed Martin Corp. (LMT | Quote | Chart | News | PowerRating), on Tuesday reported higher profit for the third quarter, helped by an increase in sales. The company's third quarter net earnings rose to $797 million or $2.07 per share from $782 million or $1.92 per share reported in the same period in 2008. Net sales for the quarter increased to $11.056 billion from $10.577 billion in the year-ago quarter.
Stock Quotes
In Wednesday's regular trading session, BA is trading at $51.79, down $0.10 or 0.19% on a volume of 1.31 million shares. In the past 52 weeks, the stock has been trading in a range of $29.05-$55.48.
For comments and feedback: contact editorial@rttnews.com
Copyright(c) 2009 RTTNews.com, Inc. All Rights Reserved
With soft demand for air travel and freight services, airlines have reduced purchases of new aircraft leading to a decline in orders as well as cancellations. This in turn, has negatively impacted the revenues of plane manufacturers. In addition to the downturn in the economy, Boeing has its own problems. The company's much-awaited, fuel efficient Dreamliner has faced several production glitches and is running behind schedule.
The Chicago, Illinois-based company had announced third-quarter charges totaling $3.5 billion, or $3.59 per share, related to its 747-8 program as well as the much-discussed Dreamliner. Boeing said in early October that it expects a pre-tax charge of about $1.0 billion in the third quarter as higher production costs and difficult market conditions are affecting its 747-8 program. The company had also announced a pre-tax charge of $2.5 billion in the third quarter related to the Dreamliner, as the initial flight-test airplanes have no commercial market value.
Third-Quarter Results
Boeing reported net loss for the third quarter of $1.56 billion, or $2.23 per share, compared to net earnings of $695 million, or $0.96 per share, in the same period last year.
The results for the latest quarter include charges of $2.46 per share related to reclassification to research and development of costs incurred through July for the first three 787 flight-test airplanes, spending on those planes for August and September of $0.14 per share, and a charge related to the 747 program of $0.99 per share. The year-ago quarter's results were impacted by a labor strike and supplier production problems that reduced earnings by an estimated $0.60 per share.
Net loss from continuing operations for the latest quarter was $1.56 billion, or $2.22 per share, compared to net income from continuing operations of $683 million, or $0.94 per share in the year-ago period. On average, sixteen analysts polled by Thomson Reuters expected the company to report loss of $2.12 per share for the quarter. Analysts' estimates typically exclude special items.
Total revenues for the quarter grew 9% to $16.69 billion from $15.29 billion in the prior-year quarter, which was strike affected. Analysts had a consensus revenue estimate of $17.18 billion for the quarter.
Sales of products for the quarter increased to $13.97 million from $12.41 million in the year-ago period, while sales of services declined to $2.72 million from $2.89 million a year ago.
Commenting on the results, Jim McNerney, Chairman, President and Chief Executive Officer of Boeing, said, "The 787 cost reclassification and the 747 charge for increased costs and difficult market conditions clearly overshadowed what continues to be otherwise solid performance across our commercial production programs and defense business. We look forward to getting the 787 and 747-8 in the air soon and moving forward with flight test and certification for these two important programs."
Boeing operates in five segments: Commercial Airplanes, Boeing Military Aircraft, Network and Space Systems, Global Services and Support, and Boeing Capital Corporation.
At Boeing Commercial Airplanes or BCA, third-quarter revenues climbed 13% to $7.88 billion on higher airplane deliveries partially offset by lower services volumes, while revenue for the year-ago period was affected by a labor strike and supplier production problems. Loss from operations for the quarter was $2.84 billion compared to earnings from operations of $394 million in the year-ago period. The loss for the quarter reflects the charges related to the 787 and 747 programs. Boeing is the world's second-largest commercial aircraft maker after Europe's Airbus.
Boeing Integrated Defense Systems or IDS generated revenues of $7.8 billion in the third quarter, up 3% from last year. Earnings from operations for the segment increased 4% from the year-ago period to $885 million. The segment's backlog reduced to $65.8 billion at the end of the quarter primarily due to termination of the manned ground vehicle portion of the Future Combat Systems contract reflecting changing US defense priorities.
Boeing Military Aircraft third-quarter revenue rose 7% from a year ago to $3.95 billion, while earnings from operations climbed 25% to $486 million. During the quarter, BMA delivered 34 aircraft, the third P-8A achieved its first flight, the P-8 India contract was finalized, and the Chinook program received a 15-aircraft contract from Canada.
At Network & Space Systems, quarterly revenues declined 9% from the prior-year quarter to $2.71 billion driven by lower volume on intelligence and security systems, missile defense, and combat systems. Earnings from operations for the segment declined 17% from the prior-year period to $252 million.
Global Services & Support or GS&S revenues increased 15% from the year-ago period to $2.08 billion on higher volume across its broad portfolio of services and logistics products. The segment reported earnings from operations of $147 million, down 10% from the year-ago period.
Boeing Capital Corporation or BCC reported third-quarter pre-tax earnings of $39 million, up 5% from $37 million in the same period last year. Revenue for the quarter declined 3% from a year ago to $166 million.
Total company backlog at quarter-end was $320 billion, down 2% in the quarter, as backlog for both Commercial Airplanes and Integrated Defense Systems declined during the period.
Boeing delivered 113 commercial airplanes in the third quarter, compared to 84 deliveries in the year-ago period. The aircraft that were delivered during the quarter include 90 737 Next Generation airplanes, four 767s and nineteen 777s. For the year-to-date period, the company's commercial airplanes deliveries totaled 359.
In August, Boeing reported a 17% increase in profit for the second quarter, driven by growth in defense programs and strong operating performance in defense and commercial airplanes segments. Net earnings increased to $998 million, or $1.41 per share, from $852 million, or $1.16 per share, reported in the same quarter last year. Total revenues for the quarter increased to $17.15 billion from $16.96 billion in the prior year quarter.
Year-To-Date Results
For the nine months of fiscal year 2009, Boeing's net earnings dropped to $44 million, or $0.06 per share, from $2.76 billion, or $3.76 per share, in the previous-year period. The results for the nine months include charges incurred in the third quarter and a first-quarter charge of $0.38 per share from reductions to future twin-aisle production rates and lower delivery price escalation forecasts in Commercial Airplanes.
Net earnings from continuing operations for the period was $52 million, or $0.07 per share, compared to net earnings from continuing operations of $2.74 billion, or $3.74 per share, in the same period last year.
Revenue for the nine-month period rose 4% to $50.34 billion from $48.25 billion in the year-ago period.
Outlook
Looking ahead, Boeing lowered its earnings outlook for fiscal year 2009 to include the 787 cost reclassification and 747 charge. The company now forecasts earnings in a range of $1.35-$1.55 per share, compared to the prior range of $4.70-$5.00 per share.
The company, however, reiterated its forecast for full-year revenue in a range of $68 billion-$69 billion.
Analysts expect the company to report earnings of $1.54 per share on revenues of $67.83 billion for the year.
Operating cash flow for the year is still expected to be greater than $2.5 billion, including discretionary pension contributions of about $0.5 billion and an assumption of $0.8 billion for new commercial airplane financings.
Commercial Airplanes' 2009 delivery guidance remains at between 480 and 485 airplanes and is sold out. BCA's 2009 revenue is unchanged at between $34 billion and $35 billion, while operating margin is now expected to be between minus 3% and minus 2.5% due to the 787 and 747 impacts. Earlier, the company had forecast operating margin between 8% and 8.5%.
IDS guidance for 2009 remains unchanged with revenue between $33 billion and $34 billion and operating margins of about 10%.
Boeing Capital Corp. now expects that the aircraft finance portfolio will be stable as the amount of new aircraft financing in 2009 will approximate normal portfolio runoff due to customer payments and depreciation. Earlier, the aircraft finance portfolio was expected to increase modestly as the amount of new aircraft financing in 2009 was forecast to exceed normal portfolio runoff due to customer payments and depreciation.
Boeing raised its 2009 R&D forecast to a range of $6.6 billion and $6.8 billion, up from the prior range of $3.6 billion-$3.8 billion, driven by the 787 cost reclassification, an operating model adjustment to better balance BCA R&D efforts, and higher IDS R&D.
Capital expenditures for the year are now expected to be about $1.3 billion, down from the prior expectation of approximately $1.4 billion. The company continues to expect non-cash pension expense of about $0.9 billion in 2009.
The company said today that the 787 program has begun the previously announced reinforcement to an area within the side-of-body joint. First flight of the airplane remains on track to occur by the end of 2009, with first delivery scheduled for the fourth quarter of 2010, the company said. Total firm orders are now 840 airplanes from 55 customers, including the previously disclosed ten-unit cancellation that occurred after the end of the quarter.
In early October, Boeing had announced a delay in the first flight and first delivery of its 747-8 Freighter. The company currently expects first flight of the 747-8 Freighter to occur by early next year with the flight test program taking place in 2010. First delivery of the 747-8 Freighter is now expected in the fourth quarter of 2010. The company's previous schedule for the delivery of the first 747-8 Freighter was the third quarter of 2010.
Boeing said in late September that has received the draft request for Proposals, or RFP, for the KC-X Tanker competition from the U. S Air Force for aerial refueling tankers. The contract is for a new fleet of 179 tanker aircraft valued at about $35 billion, with Boeing and a joint Northrop Grumman Corp. (NOC | Quote | Chart | News | PowerRating), and Airbus team being the major contenders. The contract is one of the largest military deals ever awarded and could be extended for decades and eventually cost $100 billion for 400 to 500 of the planes.
The Air Force expects to announce the contract by mid-2010, and the delivery of the planes is expected to begin in 2015. Each bidder must meet 373 mandatory requirements for the new tanker, as specified by the Pentagon, to qualify for the bidding process.
Peer Performance
Boeing's larger rival in the defense sector, Lockheed Martin Corp. (LMT | Quote | Chart | News | PowerRating), on Tuesday reported higher profit for the third quarter, helped by an increase in sales. The company's third quarter net earnings rose to $797 million or $2.07 per share from $782 million or $1.92 per share reported in the same period in 2008. Net sales for the quarter increased to $11.056 billion from $10.577 billion in the year-ago quarter.
Stock Quotes
In Wednesday's regular trading session, BA is trading at $51.79, down $0.10 or 0.19% on a volume of 1.31 million shares. In the past 52 weeks, the stock has been trading in a range of $29.05-$55.48.
For comments and feedback: contact editorial@rttnews.com
Copyright(c) 2009 RTTNews.com, Inc. All Rights Reserved
For full details on Lockheed Martin Corp (LMT) LMT. Lockheed Martin Corp (LMT) has Short Term PowerRatings at TradingMarkets. Details on Lockheed Martin Corp (LMT) Short Term PowerRatings is available at This Link.
For full details on Northrop Grumman Corp (NOC) NOC. Northrop Grumman Corp (NOC) has Short Term PowerRatings at TradingMarkets. Details on Northrop Grumman Corp (NOC) Short Term PowerRatings is available at This Link.
For full details on Boeing Co (BA) BA. Boeing Co (BA) has Short Term PowerRatings at TradingMarkets. Details on Boeing Co (BA) Short Term PowerRatings is available at This Link.
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