Boeing Reports First Quarter Earnings
Boeing today published its earnings for the first quarter of 2009, the first full quarter after the IAM strike that stalled production for two months late last year.
The key numbers are as followed:
- First-quarter net income was $0.6 billion with earnings per share of $0.86 which includes the previously announced $0.38 per share reduction from revised twin-aisle commercial airplane production rates and lower price escalation forecasts
- Revenue rose 3 percent to $16.5 billion on higher commercial airplane deliveries and higher volume in defense
- Operating cash flow was $0.2 billion
- Backlog at $339 billion — nearly five times current annual revenues
- 2009 earnings outlook reduced to reflect changes in commercial market; outlook for Integrated Defense Systems is reaffirmed on solid execution
As reported in its 2008 fourth quarter/year end earnings, the 747-8 program attributed a forward reaching loss due to increased development costs. The recent announcement to trim 777 production from June 2010 and whilst holding current build rates on the 747 and 767 meant that EPS dipped to $0.86/share. Broader market consensus was looking at $0.93/share.
While the current state of the airline industry wanes, many neutral ratings have stifled the stock despite the recent developments on the 787 Dreamliner, due to fly for the first time by the end of this quarter. Despite the increased charge to the program, the 747-8F program remains on track since their rescheduling in November 2008.
With Lufthansa currently being the only airline customer for the 747-8 Intercontinental, the airline tells FleetBuzz Editorial.com that the order is not in jeopardy and intends to take delivery of all 20 firmly ordered airplanes.
“There are no changes regarding our 747-8I order and can assure you that this order will stay as it is,” says Lufthansa spokesperson S.Ptassek.
Boeing has also moved its scheduled delivery of the 747-8I from the second quarter of 2011 to the fourth quarter of that year in line with customer discussions.
All eyes are fixed on the 737 line with a cut in production on everyone’s lips. While thus far in 2009 the company has not suffered any cancellations on this model, any production adjustment is unlikely to take place before the fourth quarter of this year. Production estimates suggest the 737 is churning out 31 airplanes a month - some observers have suggested a potential production cutback to around 23 airplanes a month or around 25%. This site predicts that any cuts to 737 production will be closer to 26 or 27 airplanes a month or around 15% less than current rates.
Boeing’s CEO Jim McNerney states that “the expanded global economic downturn is presenting unprecedented challenges in our commercial airplane markets,”.
As financing dries up, the push for late 2010/2011 liquidity will ultimately discern between greater deferrals or possibly even cancelled orders. Given the diverse backlog and breathing space current deferrals have caused already, the pressure on earnings for the rest of 2009 and 2010 depends largely whether a rebound or recovery in the freight and passenger travel markets occurs.
That recovery many not be due any time soon, but neither will the downturn last forever.
Jim McNerney
• $0.38c attributed to 747-8 charge, included in current EPS
• Business remains solid
• Commercial Airplane Services has strong earnings despite softer revenue
• Detailed design on 747-8 Intercontinental underway
• 747-8I EIS shifts from Q2 2011 to Q4 2011
• 787 on schedule
• All 787 systems cleared for first flight
• Full simulation of 787 first flight completed
• ZA001 will move to flight line soon, will be fuelled, conduct taxi tests
• Vibration tests on ZA002 due this week before ZA001 takes to the skies
• Expect orders churn on 787
• Total backlog at $339bn
• On track to cut 10,000 jobs by end of 2009
• 32 cancelled 787 orders this year
• 60 deferrals for 2010 and 2011 (half & half, slightly more narrowbodies)
• More deferrals beyond that from all regions and models
• Over-committing offset current/anticipated 737 production rates
• More orders moving “out” than moving “forward” on the 737
• Over-ordering on 737 backlog in anticipation of softening
• Don’t intend to kill 747-8 program
• No loss on 787 Dreamliner program
• Global Aeronautica – taken direct control, making good progress through “bottlenecks”, nothing preventing 787 ramp up
• Pressure remains on 787 non recurring cost – remains a very economic proposition over time despite costing more and taking longer
• Heartened by what seen in first production 787, condition of assembly, “very good shape”
• Deferrals remarkably balanced
James Bell
• 787 in much better shape than other programs
• Revenues up 3% YoY
• $235m earnings down, $180m increased forward loss on 747-8
• BCC well positioned to re-enter financing market
• Aim to provide additional $1bn financing for 2009
• Reduced share purchases
• Credit rating remains amongst strongest in industry
• EPS guidance of $4.70-$5.00
• 2010 guidance to follow
• Expect lower pension costs
21 comments April 22nd, 2009
