Aerospace and defense giant The Boeing Company (BA –Free The Boeing Company Stock Report) has reported March-period financial results. For the quarter, revenues came in at $22.9 billion, or 2% lower than the year-earlier tally. As for the bottom line, Boeing posted profits of $3.75 a share, compared to $4.15 last year. Of course, the quarter was significantly impacted by its troubled 737 Max 8 aircraft. On March 10th, a 737 operated by Ethiopia Airlines crashed six minutes after takeoff. This tragedy shared a lot of similarities to the Lion Air October, 2018 crash. Indeed, it has been confirmed that both incidents involved the erroneous activation of the aircrafts' software that controls a plane's pitch. Boeing continues to work on a software patch that will hopefully remedy this situation from happening again. In the meantime, all 737 Max 8 aircraft around the world remain grounded, and Boeing recently announced that it has reduced its production schedule from 52 a month, down to 42.
Looking at the March quarter in more detail, Boeing delivered just 149 planes, compared to 184 in the year-ago period. Revenues in the Commercial Airplanes division fell 9%, to $11.8 billion, and the operating margin narrowed 100 basis points, to 9.9%, reflecting increased 737-related costs. On a brighter note, the Defense, Space & Security segment achieved a revenue advance of 2%, to $6.6 billion, and the operating margin widened to 12.8%, from 11.7% last year. Higher sales of satellites, weapons, and surveillance aircraft fueled the solid results.
Going forward, because of the 737 Max 8 troubles, management has refrained from issuing 2019 financial guidance. What's more, at this time, it is unknown when the software update will be officially rolled out and adopted by airlines, and when these planes will again hit the runways. As such, Boeing's near-term financial picture is quite cloudy. We are, however, slashing our 2019 earnings forecast to $18.00 per share (our original estimate was $22.25). Our new call is only slightly higher than 2018's tally of $17.86 a share. Lastly, we are reducing our 2020 share-net estimate to $23.00, from $25.00.
As for the stock, it has actually performed quite well, year to date, and was up modestly following the release of the March-quarter financials. In our view, most investors that have continued to hold through this situation should probably stay the course. However, we suggest that new commitments refrain at this time, until the 737 Max 8 problems are fully fleshed out and resolved.
About The Company: The Boeing Company is a leading manufacturer of commercial jet aircraft. It also produces fighters (F-15, F/A-18), C-17 cargo carrier, V-22 helicopter, E-3 AWACS, E-4 command post, E-6submarine communicator, ground transportation systems, develops the space station, and does work on theF-22 (ATF).
- Ian Gendler
