American airplane maker Boeing BA released its second quarter earnings results on July 29 before the market opened.
Tompany reported lower-than-expected revenue as the coronavirus pandemic resulted in lower demand for air travel. Likewise, it reported higher losses than expected.
The key numbers
Boeing reported an adjusted loss per share of $4.79 vs. the expected loss per share of $2.54. The company recorded a net loss of $2.40 billion, translating to a GAAP loss of $4.20 per share.
The company booked second quarter revenue of $11.8 billion, down 25% from the same quarter last year. Analysts had expected the metric to be around $13.16 billion.
In a statement, President and CEO Dave Calhoun commented on the challenges posed by the pandemic and provided an update on the 737 Max:
“In the second quarter, Boeing restarted production operations across key sites following temporary pauses to protect its workforce and introduce rigorous new health and safety procedures. Despite the challenges, Boeing continued to deliver across key commercial, defense, space and services programs. The company also resumed early stages of production on the 737 program with a focus on safety, quality and operational excellence. Following the lead of global regulators, Boeing made steady progress toward the safe return to service of the 737, including completion of FAA certification flight tests.”
The company exited the quarter with a backlog of $408.7 billion, down from $438.6 billion reported in the year-ago period.
Segment performance
In the commercial segment, Boeing delivered 20 planes against 90 delivered in the same period a year ago. Revenue from the commercial division came in 65% lower at $1.63 billion on the back of lower delivery volume. Operating margin squeezed to -169.1%, down from -104.7% reported last year, as the company incurred abnormal production expenses to the tune of $712 million associated with the 737 Max. In addition, $468 million of severance expenses negatively impacted operating margin. The segment reported a backlog of 4,500 aircraft, or $326 billion.
Defense contributed $6.6 billion in consolidated revenue, which remained flat as compared to the year ago. The pandemic had an adverse impact on derivative aircraft programs. This was partially compensated by higher volume across the remainder of the portfolio. Operating margin contracted 5.7 basis points to 9.1%. The segment reported backlog of $64 billion, 31% of which are from international customers.
Impact of Covid-19
Calhoun believes that aviation demand would take two to three years to recover following the pandemic. International demand for air travel, in particular, has softened, which in turn has weakend the outlook for the company's widebody commercial jets such as the 787 Dreamliner and the 777.
Boeing announced earlier this year that it would trim as much as 10% of its workforce by way of buyout packages and involuntary termination, citing production slowdown and weak air travel demand.
Update on production
The 737 production rate will be increased to 31 per month by the start of 2022. The company’s previous forecast stated it would produce the same amount of planes per month in 2021. The company will drop the 787 production rate to six per month from 10 per month. The 777/777X production rate will be reduced to a combined two per month in 2021.
Guidance
Boeing did not provide any financial forecast.
Disclosure: I do not hold any positions in the stocks mentioned.
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