Aerospace giant Boeing Co. (BA, Financial) released robust second-quarter earnings and operating cash flow, but missed revenue estimates. The company posted adjusted earnings per share of $2.55 for the second quarter. In contrast, revenue stood at $22.7 billion, down 8% year over year. The lower revenue was on account of a decline in aircraft deliveries.
Boeing and European rival Airbus (EADSY, Financial) dominate the commercial aircraft market. For the past five years, however, Boeing has outperformed Airbus, thereby gaining supremacy.
Despite the revenue miss, the company’s strong EPS allowed it to project impressive guidance for the whole year. Boeing projects its earnings for 2017 to increase by 75 cents a share to between $11.10 and $11.30.
By the numbers
Boeing reported a profit of $1.76 billion, or $2.89 per share, versus a loss of $234 million, or 37 cents a share, in the prior-year quarter.
The airplane manufacturer posted an operating margin of 10%. The company’s free cash flow increased $2 billion from the same period last year to $4.5 billion. Boeing registered revenue of $22.75 billion, down from $23.01 billion in the year-ago quarter. The commercial airplane revenue stood at an impressive $15.7 billion on the back of planned manufacturing pace and delivery timings. The company paid $0.9 billion in dividends during the quarter, up 30% from second-quarter 2016.
Boeing has $10.3 billion in cash and investments in marketable securities versus $9.2 billion in the first quarter of 2017. The company recorded $10.8 billion in debt at the end of the second quarter, which was unchanged from the previous quarter.
Orders and deliveries
Commercial aircraft deliveries for the quarter stood at 183 aircraft, down from 199 in the same period last year. The company largely benefited from the delivery of its 787 Dreamliner as the company generated huge cash flow. For the entire year, Boeing targets to dispatch between 760 and 765 planes.
Demand for airplanes has improved this quarter thanks to the Paris Air Show. Boeing received orders for 56 widebody planes and 361 orders for the 737 MAX 10 at the air show. The Chicago-based company recorded net orders for 183 airplanes during the quarter. At the end of the quarter, Boeing’s backlog stood at $482 billion, including net orders worth $27 billion received during the quarter. Boeing has a massive backlog of more than 5,700 aircraft.
Effective steps
The company is now looking to streamline and simplify production of its reengineered 737 MAX models in view of finishing the development of other impending planes. President and CEO Dennis Mullenberg commented:
“Our teams are delivering better performance in every segment of the business, which is reflected in our strong second-quarter results and improved 2017 outlook. Our robust cash flow enabled us to return more value to shareholders, invest in future growth and in our people, including a plan to accelerate pension funding that also reduces risk and cyclicality in our business.”
During the quarter, the company delivered the first 737 MAX jet. For the rest of the year, the company hopes to trim costs, speed up the production process, innovate and focus on quality and safety enhancements to deliver better products to customers.
The robust cash flow helped Boeing provide attractive dividends to its shareholders. In addition, the company will utilize the remaining cash for future growth plans.
Future outlook
Based on the strong second-quarter performance, the company remains optimistic, saying it would generate huge operating cash flows along with better operating margins and EPS. Operating cash flow is expected to surge $1.5 billion to $12.25 billion. Capital expenditure is projected to decrease by $300 million to $2 billion. Currently, the company’s health looks quite sound. It will be interesting to see Boeing’s third-quarter results.
Disclosure: I do not hold any position in the stocks mentioned in this article.
