Monday, August 2, 2021
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Boeing Stock Falls As Loss Misses But CEO Sees ‘Inflection Point’

Boeing‘s (BA) Q1 loss missed forecasts while revenue topped expectations as the new presidential plane being developed saw a charge. Boeing stock fell.


The report comes after top jet-engine makers General Electric (GE) and Raytheon Technologies (RTX) reported mixed results Tuesday. But GE backed expectations for an aviation recovery in the second half of 2021.

Boeing Earnings Report

Per-shares losses narrowed to $1.53 from $1.70 a year ago but missed views for a loss of $1.17 a share. Revenue rose 10% to $15.22 billion, beating consensus for $14.38 billion. Cash outflow improved to $3.7 billion from $4.7 billion. Total backlog ticked up to $364 billion from $363 billion in Q4 as Boeing added 76 net commercial airline orders.

Commercial aircraft revenue fell 31% to $4.27 billion. Boeing previously reported that Q1  deliveries jumped 54% to 77, including 63 737s. But a 737 Max electrical wiring issue was disclosed on April 7, and affected carriers have temporarily grounded the jets. In a note to employees, CEO David Calhoun said Boeing is finalizing plans and processes with the FAA for bringing them back into service.

Calhoun told analysts on a conference call Wednesday that Boeing “continues to anticipate the next six months will be very challenging for our airline customers, and the entire industry,” with passenger traffic returning to 2019 levels in 2023-2024.

He expects 737 Max regulatory approval from China in the second half of the year and still sees delivery of the first 777X in late 2023.

CFO Greg Smith reiterated that he expects Boeing to turn cash positive flow in 2022, but it depends on the market’s recovery.

The 737 program continues to expect to gradually increase production to 31 per
month in early 2022. During Q1, the 787 consolidated final assembly at South Carolina and transitioned to a production rate of 5 aircraft per month.

Defense revenue rose 19% to $7.2 billion. Boeing didn’t record a charge on the KC-46 tanker program during Q1, but saw a $318 million pre-tax charge on the Air Force One program due to Covid-19 and performance issues at a supplier.

Global services revenue fell 19% to $3.7 billion.

Shares fell 2.8% to 235.71 in stock market trading Wednesday. Boeing stock recently made a round-trip triggering a sell signal, but is gaining support near the 50-day line, and a possible double-bottom base is forming, according to MarketSmith chart analysis.

Top Boeing supplier Spirit AeroSystems (SPR) fell 1%, and GE lost 2%.

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Boeing Stock Headwinds Easing

The earnings report comes after Calhoun said last week that the company doesn’t plan to bring back the Boeing stock dividend in the near term, adding that cash flow should turn positive again in the near- to medium-term future.

The board of directors also extended the standard retirement age to 70 from 65 for its CEO. Calhoun, 64, has served as president and CEO since Jan. 13, 2020.

Meanwhile, Boeing is seeing positive trends. On Sunday, a top European Union official said U.S. tourists who have been vaccinated against the coronavirus can visit this summer, lifting Boeing stock and other aviation stocks.

Earlier, U.S. health officials said fully vaccinated people can travel within the U.S., and the Transportation Security Administration has seen over 1 million travelers come through its checkpoints daily since mid-March.

With vaccination rates rising and the Boeing 737 Max returning to service, airlines have resumed aircraft orders. February was the first month in more than a year that orders topped cancellations, and the momentum continued into March.

But Boeing is still coming out of a deep hole: 737 Max orders shrank by over 1,040 in 2020 as nearly 600 have been removed from the backlog and nearly 450 have been canceled by carriers.

However, Boeing’s defense business is also seeing some tailwinds. The Australian Navy and Air Force ordered 11 more P-8 maritime surveillance aircraft on April 1, and the U.S. Air Force awarded Boeing a $2.1 billion contract on Jan. 20 for 15 more KC-46 tankers.

Still, the KC-46 program has been a drag on Boeing earnings as it has cost over $5 billion in charges so far, including a $275 million charge in Q4 due to “production inefficiencies including impacts of Covid-19 disruption.”

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Space Setbacks

Boeing said Wednesday that it’s space programs are going well though they continue to hit snags.

It now plans to launch the uncrewed test of its Starliner capsule to the International Space Station in August or September. Rival SpaceX has launched astronauts to the ISS three times.

SpaceX is pulling out in front of Boeing in other areas. NASA selected the SpaceX Starship to land astronauts on the moon, making the future of Boeing’s Space Launch System rocket hazier.

The SLS successfully completed a so-called hot fire last month to test whether the core stage of the rocket is ready for launch. But the program has seen continued delays and cost overruns.

Still, on Tuesday, the core stage of the SLS arrived to Florida to eventually be assembled with the rest of the components. NASA continues to expect to launch it by the end of this year.

Follow Gillian Rich on Twitter @IBD_GRich for aviation news and more.


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