Wednesday, 24 October 2018

Boeing's impressive third-quarter results

The Boeing Company reported third-quarter revenue of $25.1 billion driven by higher defense volume services growth. The company delivered 190 commercial aeroplanes, including 57 737 MAX aircraft during the third-quarter. 

Revenue increased to $25.1 billion driven by higher defense and services volume

Strong operating cash flow of $4.6 billion; repurchased 7.0 million shares for $2.5 billion
Total backlog grew to $491 billion, including more than 5,800 commercial aeroplanes
Cash and marketable securities of $10.0 billion provide strong liquidity
Reaffirmed cash guidance; raised revenue and EPS guidance; updated segment margin guidance


The company's revenue guidance increased $1.0 billion to between $98.0 and $100.0 billion, driven by defense volume and services growth, inclusive of the KLX acquisition. Operating cash flow guidance is reaffirmed at $15.0 to $15.5 billion. Full year GAAP earnings per share guidance is increased to between $16.90 and $17.10 from between $16.40 and $16.60 and core earnings per share (non-GAAP)* guidance is increased to between $14.90 and $15.10 from between $14.30 and $14.50 driven by a lower-than-expected tax rate and improved performance at Commercial Airplanes.

"Our teams continued to perform at a high level during the quarter, driving solid operating performance and robust cash generation, and continuing to deliver on our One Boeing advantage by bringing the best of Boeing to our customers," said Boeing Chairman, President and Chief Executive Officer Dennis Muilenburg.

"During the quarter we captured important new defense business, winning and investing in the MQ-25 and T-X programs and securing the MH-139 contract, clearly demonstrating the value Boeing brings to customers while positioning us well for future growth opportunities. Within the Commercial Airplanes business, the 777X static test airplane was completed and moved into test setup and the team's focus on execution across our production programs continued to drive outstanding performance and strong operating margins. Our Global Services business continues to deliver on total lifecycle value to our customers, with key wins in the quarter including P-8 Poseidon training contracts for the U.S. Navy and Royal Australian Air Force and an order from GECAS for 20 737-800 Boeing Converted Freighters. Additionally, we began integrating new data analytics tools, powered by Boeing AnalytX, into all Boeing Defence Australia support contracts, enhancing its position as a leading fleet services provider in the region."

"This strong underlying performance, along with growth across our businesses we've seen throughout the year, give us confidence to raise our 2018 revenue and earnings guidance and reaffirm our operating cash flow guidance."



















Table 1. Summary Financial
Results

Third Quarter



Nine Months


(Dollars in Millions, except per share
data)

2018

2017

Change

2018

2017

Change













Revenues

$25,146

$24,223

4%

$72,786

$69,235

5%













GAAP












Earnings From Operations

$2,227

$2,630

(15)%

$7,812

$7,366

6%
Operating Margin

8.9%

10.9%

(2.0) Pts

10.7%

10.6%

0.1 Pts
Net Earnings

$2,363

$1,810

31%

$7,036

$5,138

37%
Earnings Per Share

$4.07

$2.99

36%

$11.95

$8.39

42%
Operating Cash Flow

$4,559

$3,396

34%

$12,375

$10,443

19%
Non-GAAP*












Core Operating Earnings

$1,890

$2,284

(17)%

$6,793

$6,317

8%
Core Operating Margin

7.5%

9.4%

(1.9) Pts

9.3%

9.1%

0.2 Pts
Core Earnings Per Share

$3.58

$2.62

37%

$10.55

$7.28

45%

*Non-GAAP measure; complete definitions of Boeing's non-GAAP measures are on page 7, "Non-GAAP Measures Disclosures."    
...











Table 2. Cash Flow

Third Quarter

Nine Months
(Millions)

2018

2017

2018
2017
Operating Cash Flow

$4,559

$3,396

$12,375

$10,443
Less Additions to Property, Plant & Equipment

($457)

($399)

($1,227)

($1,304)
Free Cash Flow*

$4,102

$2,997

$11,148

$9,139


Commercial Airplanes

















Table 4. Commercial Airplanes

Third Quarter



Nine Months


(Dollars in Millions)

2018

2017

Change

2018

2017

Change













Commercial Airplanes Deliveries

190

202

(6)%

568

554

3%













Revenues

$15,276

$15,393

(1)%

$43,409

$42,626

2%
Earnings from Operations

$2,023

$1,513

34%

$5,175

$3,665

41%
Operating Margin

13.2%

9.8%

3.4 Pts

11.9%

8.6%

3.3 Pts


Commercial Airplanes third-quarter revenue of $15.3 billion was relatively unchanged, reflecting lower deliveries largely offset by mix (Table 4). Third-quarter operating margin increased to 13.2 percent, reflecting higher 787 margin and strong operating performance on production programs, partially offset by $112 million of cost growth on the KC-46 Tanker program due to higher than expected effort to meet customer requirements to support delivery of the initial aircraft, as well as due to incremental delays in certification and testing.

During the quarter, Commercial Airplanes delivered 190 aeroplanes, including 57 737 MAX aeroplanes. The 777X program remains on track for delivery in 2020 as the static test aeroplane was completed and moved into test setup and the first two flight test aeroplanes were in production.
Commercial Airplanes booked 171 net orders during the quarter, valued at $13 billion. The 787 programme has captured more than 100 orders in 2018 and nearly 1,400 orders since its launch. Backlog remains robust with more than 5,800 aeroplanes valued at $413 billion. Commercial Airplanes revenue guidance is reaffirmed at between $59.5and $60.5 billion and margin guidance is increased to between 12% and 12.5% from greater than 11.5% on strong performance.

Defence, Space & Security
















Table 5. Defence, Space &
Security

Third Quarter



Nine Months


(Dollars in Millions)

2018

2017

Change

2018

2017

Change













Revenues

$5,729

$5,050

13%

$17,084

$15,304

12%
Earnings from Operations

($245)

$486

NM

$925

$1,649

NM
Operating Margin

(4.3)%

9.6%

(13.9) Pts

5.4%

10.8%

(5.4) Pts
Defence, Space & Security third-quarter revenue increased to $5.7 billion driven by increased volume across government satellites, KC-46 Tanker, F/A-18 and weapons (Table 5). The third-quarter operating margin was (4.3) %, primarily reflecting $691 million of charges related to planned investments in the T-X and MQ-25 programs and $64 million related to cost growth on the KC-46 Tanker programme.

During the quarter, Defense, Space & Security won key franchise program awards, including the T-X Trainer and MH-139 helicopter for the U.S. Air Force, the MQ-25 unmanned aircraft for the U.S. Navy, and the fourth KC-46 Tanker production lot. Significant milestones during the quarter included first flights of the Apache and Chinook for the Indian Air Force and receipt of Supplemental Type Certification for the KC-46 Tanker program, signifying completion of FAA certification. We also completed the acquisition of Millennium Space Systems, which will provide customers with advanced small-satellite technologies and flexible solutions.

Backlog at Defense, Space & Security was $58 billion, of which 31% represents orders from customers outside the U.S. Defense, Space & Security revenue guidance increased to between $22.5 and $23.0 billion from between $22.0 and $23.0 billion driven by higher volume and margin guidance is adjusted to greater than 6.5% from between 10% and 10.5% primarily to account for the investments in the business.
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