American aerospace and defense giant Boeing Co. (BA, Financial) released its fourth-quarter earnings results before the opening bell on Jan. 27.
The company reported a wider-than-anticipated loss and higher-than-expected revenue for the quarter. Results were down year over year due to lower commercial deliveries and service volume.
The company's shares surged 3.6% to $194.80 per share in pre-market trading following the earnings announcement.
The key numbers
Boeing reported an adjusted loss of $15.25 per share versus the expected loss of $1.80 per share. The company recorded a net loss of $8.4 billion, translating to a GAAP loss of $14.65 per share.
The company booked revenue of $15.3 billion, down 15% from the same quarter last year. Analysts had expected the metric to be around $15.07 billion.
The company ended the quarter with a backlog of $363 billion, which includes more than 4,000 commercial airplanes.
In a statement, President and CEO Dave Calhoun commented the following:
"2020 was a year of profound societal and global disruption which significantly constrained our industry. The deep impact of the pandemic on commercial air travel, coupled with the 737 MAX grounding, challenged our results. I am proud of the resilience and dedication our global team demonstrated in this environment as we strengthened our safety processes, adapted to our market and supported our customers, suppliers, communities and each other."
He also provided an update on the 737 Max:
"The return to service of the 737 MAX in the U.S. and several other markets was an important step, and Boeing continues to follow the lead of global regulators and support its customers. Since the FAA's approval to return to operations, Boeing has delivered over 40 737 MAX aircraft and five airlines have safely returned their fleets to service as of January 25, 2021, safely flying more than 2,700 revenue flights and approximately 5,500 flight hours."
Segment performance
In the commercial segment, Boeing delivered 59 planes against 79 delivered in the same period a year ago. Revenue from the commercial division came in 37% lower at $4.7 billion on the back of lower delivery volume. The operating margin was -161.8%, down from -38.1% reported last year, as the company incurred abnormal production expenses to the tune of $468 million associated with the 737 Max. The segment reported a backlog of more than 4,000 aircraft, or $282 billion.
The defense division contributed $6.8 billion in consolidated revenue, which surged 14% as compared to the year-ago period. The segment witnessed higher volume on fighter programs and the remainder of the portfolio. The operating margin expanded 6.8 basis points to 7.4%. The segment reported backlog of $61 billion, 32% of which was from international customers.
The Covid-19 impact
Calhoun believes that aviation demand will take two to three years to recover following the pandemic. International demand for air travel, in particular, has softened, which in turn has weakened the outlook for the company's widebody commercial jets such as the 787 Dreamliner and the 777.
Boeing announced recently 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.Given the prolonged demand slump, the company said it would focus on trimming costs.
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. Boeing added that it would consolidate 787 production in 2021 at a single plant in North Charleston, South Carolina. The 777/777X production rate will be reduced to a combined two per month in 2021.
Guidance
Boeing did not provide any financial forecasts.
Disclosure: I do not hold any positions in the stocks mentioned.
Read more here:
- Verizon's 4th-Quarter Earnings Blow Past Projections
- What Investors Should Know About General Electric's 4th-Quarter Results
- Johnson & Johnson Shares Pop on Stronger-Than-Expected 4th-Quarter Results
Not a Premium Member of GuruFocus? Sign up for a free 7-day trial here.
