Struggling aerospace and defense giant Boeing (BA – Free Boeing Stock Report) has reported December-period financial results. As expected, the company's performance was lackluster because of its ongoing troubles with its 737 Max 8 platform. Despite the poor showing, Boeing shares advanced following the news. The increase, in our view, may have stemmed from investors assuming the results would have been even worse. In addition, a number of other large, multinational stocks were up following news that fears of the spread of the Coronavirus have eased somewhat.
For the December quarter, revenues were $17.9 billion, a decline of 37% year over year. Both of its major divisions sustained top-line declines. Of course, the big problem was the Commercial Aircraft business. The company only delivered 79 planes during the period, compared to 238 the year before. Revenues dropped 55%, to below $7.5 billion. The division also incurred a bottom-line loss of $2.8 billion. For comparison, it posted a profit of $2.6 billion in the prior-year period. All told, for the fourth quarter, Boeing lost $1.12 per share. For full-year 2019, it also lost money, its first annual deficit in decades.
The company's struggles are far from over. It is now approaching a year since the worldwide grounding of all 737 Max 8 aircraft. The Federal Aviation Administration (FAA) still needs to certify that the planes are safe to fly, and many airlines have already stated that their Max 8s will remain in hangers for a time, regardless of when FAA approval is granted. In a drastic move, Boeing recently halted all Max 8 production. It also replaced its CEO, and is dealing with problems, albeit less severe, with other aircraft models.
Boeing has incurred huge expenses related to the Max 8, as well as significant lost sales and other business opportunities. To combat these issues, the company recently took on more than $6 billion in debt and, presently, it appears that it is in the process of lining up additional borrowings. Due to Boeing's problems and financial hardships, we have lowered its Safety rank and our Financial Strength grade.
Moving ahead, our outlook for Boeing is bleak. The Max 8 issues will continue to plague the company for quite a while, regardless of when the FAA certifies the plane. It will have to deal with additional wrongful death suits and potential hefty fines from government agencies, as well as likely financial penalties from airlines and component suppliers. Simply put, the road ahead will be bumpy for the aerospace behemoth. On that note, management is no longer providing financial guidance, and we expect 2020 to be largely a transitional year. More specifically, Boeing will have to prioritize righting the ship and repairing its reputation. For the year, we now expect just a modest profit, but would not be surprised if more red ink appears.
We continue to recommend that investors avoid this stock. There are just too many unknowns at this time.
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-6 submarine communicator, ground transportation systems, develops the space station, and does work on the F-22 (ATF).
– Ian Gendler
