The Boeing Company (BA) overcame market pessimism, showing resilience in its core businesses with second quarter fiscal 2010 earnings of $1.06 per share, outpacing the Zacks Consensus Estimate of $1.01. The company’s results reflect solid performance across its core businesses amid lower volumes.
However, the company, like its defense peer Lockheed Martin Corporation (LMT) fell short of year-ago earnings. Last year, Boeing reported earnings of $1.41 for the corresponding period.
The street was apprehensive of Boeing’s ability to recover since its commercial airplane deliveries were badly affected by cancellation and deferment from customers absorbing the after-shocks of the worldwide recession. As a result, Boeing’s quarterly revenue decreased 9.2% year-over-year to $15.6 billion, lower than the Zacks Consensus Estimate of $16.4 billion.
Segmental Results
Commercial Airplane
Boeing’s Commercial Airplane segment in the reported quarter saw a stark 9% drop in deliveries to 114 units. A lower number of 737 and 777 airplanes flew out of Boeing without a single 747 during the quarter.
As a result, Boeing’s quarter revenue has dropped 12% to $7.4 billion. The segmental operating margin contracted to 9.2% from 9.7% in the year-ago quarter due to lower new airplane deliveries.
Boeing Defense, Space & Security
Boeing Defense, Space & Security segment witnessed an 8% drop in its quarterly revenue to $8 billion. This was due to lower volume in Network & Space Systems, partially offset by a favorable aircraft delivery mix. Boeing Military Aircraft (BMA) quarterly revenue rose 4% to $3.6 billion driven by higher Chinook deliveries and volume.
Network & Space Systems’ revenue fell 24% to $2.4 billion, impacted by lower volume on the Brigade Combat Team Modernization and Ground-based Midcourse Defense (GMD) programs. Global Services & Support (GS&S) revenue decreased 3% to $2 billion on lower maintenance modifications and upgrades volume.
Overall segmental operating margin contracted to 8.9% from 10.1% in the year-ago quarter due to lower margins in military aircraft and services.
Boeing Capital Corporation
Boeing Capital Corporation (BCC) reported quarterly revenues of $162 million compared to $167 million in the year-ago quarter. The segment generated earnings of $55 million compared to $36 million in the year-ago period. During the quarter, BCC's portfolio balance declined to $5.3 billion, down from $5.7 billion at year end, on normal run-off, asset pre-payments and depreciation.
Financial Condition
Boeing ended the quarter with cash and cash equivalents of $4.5 billion and short term investments of $5.6 billion. At year-end fiscal 2009, the company had $9.2 billion in cash and cash equivalents and $2 billion of short term investments. The company used $19 million of cash in operating activities in the first half of 2010, compared to $1.2 billion generated in the year-ago period. Long-term debt decreased to $11.4 billion at the end of the quarter from $12.2 billion at the end of fiscal 2009.
Outlook
Boeing reaffirmed its fiscal 2010 revenue in the guidance range of $64 billion – $66 billion and EPS in the range of $3.50 – $3.80. The guidance range is based upon stable operating performance amid lower volumes, higher pension expense and investment in development programs.
Commercial Airplane segment’s 2010 delivery guidance range remains unchanged at 460 – 465 airplanes. Segmental 2010 revenue guidance range is reaffirmed at $31 billion – $32 billion. However, operating margin guidance range has been raised to 7.5% – 8.5%, up from 6.5% – 7.5% on expected strong operating performance.
Defense, Space & Security segment's revenue guidance range for 2010 is reaffirmed at $32 billion – $33 billion. However, the operating margin guidance was reduced to approximately 9.5%, from approximately 10%, reflecting soft performance to date and the current contracting environment.
We are currently Neutral on the Zacks #3 Rank stock.
Read the full analyst report on "BA"
Read the full analyst report on "LMT"
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The street was apprehensive of Boeing’s ability to recover since its commercial airplane deliveries were badly affected by cancellation and deferment from customers absorbing the after-shocks of the worldwide recession. As a result, Boeing’s quarterly revenue decreased 9.2% year-over-year to $15.6 billion, lower than the Zacks Consensus Estimate of $16.4 billion.
Segmental Results
Commercial Airplane
Boeing’s Commercial Airplane segment in the reported quarter saw a stark 9% drop in deliveries to 114 units. A lower number of 737 and 777 airplanes flew out of Boeing without a single 747 during the quarter.
As a result, Boeing’s quarter revenue has dropped 12% to $7.4 billion. The segmental operating margin contracted to 9.2% from 9.7% in the year-ago quarter due to lower new airplane deliveries.
Boeing Defense, Space & Security
Boeing Defense, Space & Security segment witnessed an 8% drop in its quarterly revenue to $8 billion. This was due to lower volume in Network & Space Systems, partially offset by a favorable aircraft delivery mix. Boeing Military Aircraft (BMA) quarterly revenue rose 4% to $3.6 billion driven by higher Chinook deliveries and volume.
Network & Space Systems’ revenue fell 24% to $2.4 billion, impacted by lower volume on the Brigade Combat Team Modernization and Ground-based Midcourse Defense (GMD) programs. Global Services & Support (GS&S) revenue decreased 3% to $2 billion on lower maintenance modifications and upgrades volume.
Overall segmental operating margin contracted to 8.9% from 10.1% in the year-ago quarter due to lower margins in military aircraft and services.
Boeing Capital Corporation
Boeing Capital Corporation (BCC) reported quarterly revenues of $162 million compared to $167 million in the year-ago quarter. The segment generated earnings of $55 million compared to $36 million in the year-ago period. During the quarter, BCC's portfolio balance declined to $5.3 billion, down from $5.7 billion at year end, on normal run-off, asset pre-payments and depreciation.
Financial Condition
Boeing ended the quarter with cash and cash equivalents of $4.5 billion and short term investments of $5.6 billion. At year-end fiscal 2009, the company had $9.2 billion in cash and cash equivalents and $2 billion of short term investments. The company used $19 million of cash in operating activities in the first half of 2010, compared to $1.2 billion generated in the year-ago period. Long-term debt decreased to $11.4 billion at the end of the quarter from $12.2 billion at the end of fiscal 2009.
Outlook
Boeing reaffirmed its fiscal 2010 revenue in the guidance range of $64 billion – $66 billion and EPS in the range of $3.50 – $3.80. The guidance range is based upon stable operating performance amid lower volumes, higher pension expense and investment in development programs.
Commercial Airplane segment’s 2010 delivery guidance range remains unchanged at 460 – 465 airplanes. Segmental 2010 revenue guidance range is reaffirmed at $31 billion – $32 billion. However, operating margin guidance range has been raised to 7.5% – 8.5%, up from 6.5% – 7.5% on expected strong operating performance.
Defense, Space & Security segment's revenue guidance range for 2010 is reaffirmed at $32 billion – $33 billion. However, the operating margin guidance was reduced to approximately 9.5%, from approximately 10%, reflecting soft performance to date and the current contracting environment.
We are currently Neutral on the Zacks #3 Rank stock.
Read the full analyst report on "BA"
Read the full analyst report on "LMT"
Zacks Investment Research
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