Boeing’s first 737 MAX makes its way through the assembly plant in Renton, Wash., in 2015. (Boeing Photo)
Boeing’s first-quarter financial stats took a serious hit in the wake of two fatal crashes involving its bestselling plane, the 737 MAX. The company estimated the additional costs associated with grounding the 737 MAX fleet at $1 billion, but more uncertainty lies ahead. Boeing executives held off on providing updated financial guidance until the impact of the 737 MAX issue becomes clearer.
Revenue: Boeing reported first-quarter revenue of $22.9 billion, which is 2 percent below the year-ago figure but in line with analysts’ expectations. The shortfall is due primarily to fewer deliveries of 737 jets.
Earnings: Net earnings for the quarter amounted to $2.15 billion, which translates to adjusted earnings per share of $3.16. That’s 13 percent below what they were a year ago but slightly higher than the $3.11 consensus forecast from Zacks Investment Research.
Word from the top: “Across the company, we are focused on safety, returning the 737 MAX to service, and earning and re-earning the trust and confidence of customers, regulators and the flying public,” Boeing CEO Dennis Muilenburg said in the company’s quarterly recap. “As we work through this challenging time for our customers, stakeholders and the company, our attention remains on driving excellence in quality and performance and running a healthy sustained growth business built on strong, long-term fundamentals.”
Word on the Street: Boeing’s share price rose 0.36 percent to close at $375.46, apparently reflecting investor relief that the quarterly results weren’t worse. The stock’s value has fallen about 8.5 percent since the beginning of March, just before the fatal crash of an Ethiopian Airlines 737 MAX.
Quarter highlightsBoeing said the $1 billion in additional costs comes primarily from reducing the 737 production rate from 52 to 42 airplanes a month, a move that spreads fixed costs over a smaller number of planes. That toll could rise if the uncertainty surrounding the 737 MAX’s fate continues into the long term. Muilenburg said Boeing is making “steady process on the path to final certification for a software update for the 737 MAX.” That update is meant to address problems with an automatic flight control system that has been linked to the Ethiopia crash as well as last October’s fatal crash of a Lion Air jet in Indonesia. Muilenburg said the fix has been tested on more than 135 flights but didn’t give a timetable for winning certification from the Federal Aviation Administration. This week Reuters quoted unnamed sources as saying certification could come as early as late May, potentially leading to a return to flight in mid-June. The process that led to the 737 MAX’s certification in 2017 is the subject of multiple investigations, including inquiries by the FAA, the Justice Department and the FBI, and a panel of experts convened by Boeing. But Muilenburg said “there was no surprise, or gap, or unknown here, or something that somehow slipped through a certification process.” Because of the focus on the 737 MAX situation, Muilenburg said Boeing hasn’t yet decided whether to go ahead with plans for a next-generation midsize airplane known as the New Mid-Market Airplane, the NMA or 797. But 777X production is moving ahead as planned, with the model’s first flight expected within months and the first 777X delivery due next year. Boeing Global Services, which was broken out as a separate business unit in 2017, brought in glowing financial results. First-quarter revenue increased 17 percent over the year-ago figure, to $4.6 billion. Boeing said the increase was driven primarily by higher volume across the portfolio, including last year’s acquisition of KLX, an aerospace parts distributor. Boeing Defense, Space & Security also served as a bright spot: Revenues for that business unit amounted to $6.6 billion, which represents a 2 percent increase over the previous year’s first-quarter figures. The first seven KC-46 tankers were delivered to the U.S. Air Force during the quarter — a milestone dimmed only slightly by reports of production problems. Boeing said its CST-100 Starliner space taxi has gone through “successful environmental testing,” The current schedule calls for an uncrewed Starliner to make its first flight to the International Space Station for NASA no earlier than August, with the first crewed flight to follow by as early as late 2019.