American aerospace and defense giant Boeing Co. (BA, Financial) released its first-quarter earnings results before the opening bell on April 28.
The company reported a wider-than-anticipated loss and higher-than-expected revenue for the quarter. Revenue was down year over year due to lower commercial deliveries and service volume.
The company's shares dropped 1.3% to $239.25 apiece in pre-market trading following the earnings announcement.
The key numbers
Boeing reported an adjusted loss of $1.53 per share versus the expected loss of $1.16 per share. The company recorded a net loss of $561 million, translating to a GAAP loss of $0.92 per share.
The company booked revenue of $15.22 billion, down 10% from the same quarter last year. Analysts had expected revenue of $15.02 billion.
The company ended the quarter with a backlog of $364 billion, which includes 76 net commercial airplanes orders.
In a statement, President and CEO Dave Calhoun commented the following:
"While the global pandemic continues to challenge the overall market environment, we view 2021 as a key inflection point for our industry as vaccine distribution accelerates and we work together across government and industry to help enable a robust recovery. Our balanced commercial, defense, space and services portfolio continues to provide critical stability for our business – and we remain focused on safety, quality and integrity as we deliver on our customer commitments."
The company also provided the following update on the 737 Max:
"Boeing is continuing to make progress on the safe return to service of the 737 MAX worldwide. In addition, we are working closely with the FAA and our customers to address electrical issues identified in certain locations in the flight deck of select 737 MAX airplanes. Since the FAA's approval to return the 737 MAX to operations in November 2020, Boeing has delivered more than 85 737 MAX aircraft and 21 airlines have returned their fleets to service, safely flying more than 26,000 revenue flights totaling over 58,500 flight hours (as of April 26, 2021)."
Segment performance
In the commercial segment, Boeing delivered 77 planes against 50 delivered in the same period a year ago. Revenue from the commercial division came in 31% lower at $4.27 billion on the back of lower delivery volume. The operating margin was -20.1%, up from -33.3% reported last year, as the company delivered more 737 airplanes and incurred lower period expenses. The segment reported a backlog of more than 4,000 aircraft, or $283 billion.
The defense division contributed $7.2 billion in consolidated revenue, which surged 19% 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 8.8 basis points to 5.6%. The segment reported backlog of $61 billion, 31% of which was from international customers.
Impact of Covid-19
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 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 five per month from 10 per month. Boeing added that it has consolidated 787 production 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.
Disclosure: I do not hold any positions in the stocks mentioned.
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