Boeing Q1 Earnings Beat As Top Line Suffers

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BA: The Boeing Company logo
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The Boeing Company

Boeing (NYSE:BA) reported a mixed quarter to start 2017. The company managed to beat earnings by a comfortable margin, while slightly missing on revenues. Revenues declined primarily because Q1 2016’s revenue figure included the delivery of three C-17 military transport aircraft, a plane that Boeing has since stopped making. Consequently, defense revenues came in 12% lower year-over-year. That said, the company’s core earnings were up about 15% year-over-year. That is mostly because the company incurred certain one-time charges amounting to more than $300 million in Q1 2016. Most impressively though, free cash flows more than tripled year-over-year on the back of improving cash profitability of the Dreamliner program, lower capex, and higher deliveries of the 737.

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Key Highlights:

  • Commercial Airplanes reported revenues to the tune of $14.3 billion, reflecting timing of deliveries and 737 MAX production. Operating margins at the segment were 8.5% due to better performance on production programs. This improvement was, however, offset by the impact of lower volume, delivery mix, and additional Tanker program costs. The company managed to bag 169 orders in the quarter, totaling about $15 billion in net orders. At present, the commercial backlog remains strong at 5,700 aircraft, representing more than 7 years of production.
  • At Defense, Boeing managed to report revenues of $6.5 billion, while operating margins came in at a strong 11.3%. The margins were driven primarily by solid performance at Boeing Military Aircraft (BMA) and Global Services & Support business. That said, segment revenues were hurt this quarter on the back of lower revenue at BMA. As mentioned previously, this decline was mostly because of the discontinued C-17 program. Operating margins at the division came in at a strong 12.2%, reflecting strong overall performance.
  • Network & Space Systems reported revenues of $1.6 billion, while operating margins came in at 6.3%. The margins were driven by lower satellite service volume and investments in development efforts. Additionally, revenues at Global Services & Support increased to $2.3 billion on the timing of contracts. Operating margins here were recorded at 13.6%, reflecting solid execution across the portfolio. Defense, Space & Security reported a solid backlog of $63 billion, with almost 34% of the business coming from international customers.
  • The company has increased its earnings guidance for the full year by $0.10. The company now estimates to report earnings between $9.20 and $9.40 for FY 2017. The increase was driven by a lower-than-expected tax rate, partially offset by higher deferred compensation expense on the higher stock price. Further, management reaffirmed its 2017 guidance for revenue, segment margins, deliveries, and cash flow.
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