The dominant player in the aircraft manufacturing business, Boeing (BA, Financial), reported its first quarter numbers of the fiscal year on April 22, which led the stock to decline 1.4% due to the company’s announcement on dearth of cash flow due to the rising Dreamliner costs. Though the company reported a rise in earnings for the quarter, there was a sharp drop in cash flow for the period that signaled a negative message within the investor community. Let’s quickly take a glimpse at the number mix posted by Boeing in its first quarter.
Earnings beat estimates, but revenue shows a drop
Earnings per share stood at $1.97, beating the analysts’ estimates of $1.84 a share, as per Bloomberg. But revenue failed to meet the expectations as it came at $22.1 billion, much below the estimate of $22.5 billion for the quarter. However, revenue rose 8% year-over-year from $20.47 billion reported a year ago.
The rise in earnings was attributed to the rising demand for its commercial aircraft. Net income including pension and other costs rose to $1.34 billion, up from $965 million a year earlier.
Having bagged over 5,700 commercial plane orders, the airplane manufacturer reported backlog orders of worth $495 billion, down from $502 billion reported in the beginning of the year. In fact, commercial aircraft deliveries rose 14% to 184 during the quarter.
Jim McNerney, CEO of Boeing, stated during the earnings conference – “With disciplined execution and a sharp focus on productivity, we are meeting increasing customer commitments while profitably growing our business. The strong operational and financial performance reinforces our ability to continue providing competitive returns for our shareholders while investing in technology and our people…”
Outlook remains positive overall
During the earnings call, Boeing has reaffirmed on its expectation to reach more than $9 billion in operating cash flow, though the Dreamliner project has been the concern for the company. The management largely believes that the 787 Dreamliner will be cash positive across the program in 2015, that will serve as an impetus to Boeing’s operating cash flow in the days ahead.
Though there is continuous pressure being felt on the revenue and margins from the 787 Dreamliner, which has been pulling down the operating margin of the airplane manufacturer, the top brass look upbeat on the improvement in earnings in 2015. The CEO has said – “Our outlook for the full year remains positive as our teams work to efficiently deliver our portfolio of industry-leading aerospace products and services…”
Boeing expects the total revenue to be between $94.5 -$96.5 billion for the year 2015. This shows the optimism it holds even though the cash consuming 787 Dreamliner’s increased production has led to the operating margin declining around 60 basis points from 10.2% in the last year’s first quarter to 9.6% in fiscal 2015’s first quarter.
Cash flow remains a concern for the investors
Presently, the cash position of Boeing does not look highly promising from the investor’s angle. The operating cash flow declined by over 92% from $1.1 billion to $88 million while the free cash flow worsened from $615 million in the last year’s similar quarter to ($486) million.
But as the management has forecasted that it will generate around $9 billion for the year, it remains to be seen if the cash flow shows a trend reversal in the next upcoming quarters.
Last word
Boeing’s growth is surely around the corner after the Dreamliner program turns cash positive by the end of 2015. Until then, the improvement of airline deliveries in the commercial airplane segment does seem to be a strong reason for investors remaining invested in the Boeing stock which has been up nearly 18% year to date.
