The Chicago based aircraft manufacturer Boeing (NYSE: BA) reported the second quarter results and missed analysts’ estimates in terms of its total revenue. However, it did beat the analysts’ predictions on its earning per share.
Let’s look into the major highlights of the second quarter earnings announced on July 23.
A quick recap of numbers
The revenue for this quarter stood at $22.05 billion, up by 1% from the last year’s similar quarter. The numbers, however, missed analysts’ estimates of $22.23 billion. The commercial airplanes segment registered a 5% growth whereas revenue from the defense, aerospace and security division fell 5%.
The total backlog of $440 billion as on June 30 remained unchanged from the beginning of the quarter. Boeing’s delivery forecast shows that the plane maker is on track to deliver 715-725 jetliners by the end of the year, having already delivered around 342 airplanes in the first half of the year.
Early in July, the company said that it had dispatched 181 commercial aircraft in the second quarter – this translates to a good 7% hike from 169 deliveries in the previous year’s comparable period. The biggest achievement in deliveries of this quarter remains the dispatch of around 30 Boeing 787 in the quarter after the production rate was increased to 10 per month; a few months ago.
- Warning! GuruFocus has detected 5 Warning Signs with BA. Click here to check it out.
- BA 15-Year Financial Data
- The intrinsic value of BA
- Peter Lynch Chart of BA
The quarterly profit increased by a whopping 52% helped by higher commercial airplane deliveries and the one-time tax gain of $524 million experienced in this quarter. The company’s net income rose from $1.09 billion or $1.41 per share a year ago to $1.65 billion or $2.24 per share in this quarter.
Analysts were however a bit taken aback by the pretax charge of $425 million for fixing wiring problems on the KC-46A tankers Boeing has been developing for the U.S. Air Force. Boeing CEO Jim McNerney thought that the tanker charge that had a bearing on the company's quarterly results was pretty "disappointing." However, the aircraft maker's overall quarterly results were good as Boeing has been keeping its operational costs under tight control.
The current outlook remains sound
As the operational performance of Boeing remains strong, the management has raised its earnings per share guidance from $7.15-$7.35 to $7.90-$8.10 per share. However, there is no change in the revenue guidance which remains in the range of $87.5 billion and $90.5 billion.
Though Defense cutbacks could take a toll on the revenue and earnings, the commercial aircraft division is the bright spot in Boeing report card. McNerney is highly positive on the company prospects for this fiscal year and the encouraging market outlook and its increase in production rate should be able to aid in achieving the increased earnings target.
Acquisitions to improve tech division
The company wants to improve its capabilities with time and thus has invested in two major acquisitions this quarter. The first one was done in May when Boeing acquired AerData Group B.V. which offers software solutions for managing leases, planning engine fleet and managing records. The second one in June was of Ventura Solutions Inc., an enterprise offering hardware and software engineering solutions.
These acquisitions could help Boeing to improve its information and security arrangements in the nearby future.
Boeing's commercial aircraft business is really doing very well. Also the two acquisitions during the period have reinforced Boeing’s capabilities. As the market conditions improve, the industry witnesses a sharp increase in demand for commercial aircraft and the leading manufacturer thus stands at a clear advantage. The company is slated to post better profits in the upcoming quarters and the management holds a positive image on Boeing's earnings for the remaining year.