Boeing reports first-quarter results and raises EPS guidance

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  • GAAP EPS of $2.34 and core EPS (non-GAAP)* of $2.01 on solid execution
  • Revenue of $21.0 billion reflecting 210 commercial and defense aircraft deliveries and services
  • Strong operating cash flow of $2.1 billion; repurchased 14.9 million shares for $2.5 billion
  • Backlog grew to $480 billion, including $27 billion of net orders during the quarter
  • Cash and marketable securities of $9.2 billion provide strong liquidity
  • Revenue, margin, and operating cash guidance reaffirmed; EPS guidance increased by $0.10 on tax benefit

 

Table 1. Summary Financial Results

First Quarter

(Dollars in Millions, except per share data)

2017

2016

Change

Revenues

$20,976

$22,632

(7)%

GAAP

Earnings From Operations

$2,024

$1,788

13%

Operating Margin

9.6%

7.9%

1.7 Pts

Net Earnings

$1,451

$1,219

19%

Earnings Per Share

$2.34

$1.83

28%

Operating Cash Flow

$2,094

$1,275

64%

Non-GAAP*

Core Operating Earnings

$1,709

$1,694

1%

Core Operating Margin

8.1%

7.5%

0.6 Pts

Core Earnings Per Share

$2.01

$1.74

16%

* Non-GAAP measures. Complete definitions of Boeing’s non-GAAP measures are on page 6, “Non-GAAP Measures Disclosures.”     

The Boeing Company reported higher first-quarter earnings and operating cash flow compared to the previous year, driven by solid execution on production programs and services (Table 1).  First-quarter GAAP earnings per share increased to $2.34 and core earnings per share (non-GAAP)* increased to $2.01. Revenue decreased to $21.0 billion, reflecting the timing of commercial and defense aircraft deliveries.

For the full year, GAAP earnings per share guidance increased to between $10.35 and $10.55 from $10.25 and $10.45 and core earnings per share (non-GAAP)* guidance increased to between $9.20 and $9.40 from $9.10 and $9.30, primarily driven by a lower-than-expected tax rate.

With a sharp focus on performance and productivity, our team delivered another quarter of solid financial results, including year-over-year earnings growth and strong operating cash flow,” said Boeing Chairman, President and Chief Executive Officer Dennis Muilenburg. “In turn, we continued to position Boeing for growth with investments in new products and services, innovation, and our people, while again demonstrating our commitment to return significant cash to our shareholders.”

“We also achieved major milestones, including the certification of the new 737 MAX 8 and first flight of the 787-10 Dreamliner, and we captured a $3.4 billion contract award for 268 Apache helicopters.”

“We remain on track to achieve our full-year revenue, earnings and cash flow targets as our teams deliver on our large and diverse order backlog. As we do so, we’re focused on accelerating productivity, quality and safety improvements, strengthening execution on development programs, and capturing new business opportunities.

Table 2. Cash Flow

First Quarter

(Millions)

2017

2016

Operating Cash Flow

$2,094

$1,275

Less Additions to Property, Plant & Equipment

($466)

($748)

Free Cash Flow*

$1,628

$527

Non-GAAP measures. Complete definitions of Boeing’s non-GAAP measures are on page 6, “Non-GAAP Measures Disclosures.”     

Operating cash flow in the quarter of $2.1 billion was driven by solid operating performance and timing of receipts and expenditures (Table 2). During the quarter, the company repurchased 14.9 million shares for $2.5 billion, leaving $11.5 billion remaining under the current repurchase authorization which is expected to be completed over approximately the next two years. The company also paid $868 million in dividends in the quarter, reflecting a 30 percent increase in dividends per share compared to the same period of the prior year.

Table 3. Cash, Marketable Securities and Debt Balances

Quarter-End

(Billions)

Q1 17

Q4 16

Cash

$8.2

$8.8

Marketable Securities1

$1.0

$1.2

Total

$9.2

$10.0

Debt Balances:

The Boeing Company, net of intercompany loans to BCC

$7.7

$7.1

Boeing Capital, including intercompany loans

$3.1

$2.9

Total Consolidated Debt

$10.8

$10.0

1 Marketable securities consists primarily of time deposits due within one year classified as “short-term investments.”

Cash and investments in marketable securities totaled $9.2 billion, down from $10.0 billion at the beginning of the quarter (Table 3). Debt was $10.8 billion, up from the beginning of the quarter, primarily due to the issuance of new debt.

Total company backlog at quarter-end was $480 billion, up from $473 billion at the beginning of the quarter, and included net orders for the quarter of $27 billion.

Segment Results

Commercial Airplanes

Table 4. Commercial Airplanes

First Quarter

(Dollars in Millions)

2017

2016

Change

Commercial Airplanes Deliveries

169

176

(4)%

Revenues

$14,305

$14,399

(1)%

Earnings from Operations

$1,215

$1,033

18%

Operating Margin

8.5%

7.2%

1.3 Pts

Commercial Airplanes first-quarter revenue was $14.3 billion on services growth, offset by lower planned 737 deliveries, as we prepare for 737 MAX entry into service in May (Table 4). First-quarter operating margin increased to 8.5 percent, reflecting improved performance on production and services programs, cost growth on the initial production of KC-46 Tanker aircraft, and less favorable delivery mix.

During the quarter, Boeing successfully completed first flight of the 787-10 Dreamliner. The 737 program rolled out the first 737 MAX 9 and received FAA certification for the 737 MAX 8. Demand continues to be strong for the 737 MAX with more than 3,700 orders since launch.

Commercial Airplanes booked 198 net orders during the quarter. Backlog remains robust with more than 5,700 airplanes valued at $417 billion.

Defense, Space & Security

Table 5. Defense, Space & Security

First Quarter

(Dollars in Millions)

2017

2016

Change

Revenues

Boeing Military Aircraft

$2,636

$3,659

(28)%

Network & Space Systems

$1,564

$1,735

(10)%

Global Services & Support

$2,332

$2,562

(9)%

Total BDS Revenues

$6,532

$7,956

(18)%

Earnings from Operations

Boeing Military Aircraft

$321

$334

(4)%

Network & Space Systems

$98

$148

(34)%

Global Services & Support

$318

$340

(6)%

Total BDS Earnings from Operations

$737

$822

(10)%

Operating Margin

11.3%

10.3%

1.0 Pts

Defense, Space & Security first-quarter revenue was $6.5 billion (Table 5). First-quarter operating margin increased to 11.3 percent, reflecting improved performance at BMA.

Boeing Military Aircraft (BMA) first-quarter revenue was $2.6 billion, reflecting lower planned deliveries, and operating margin increased to 12.2 percent on improved performance. During the quarter, BMA was awarded a contract for 268 AH-64E Apache helicopters from the U.S. Army, a contract for 17 P-8A Poseidon aircraft from the U.S. Navy, Royal Australian Air Force, and the U.K. Royal Air Force, and a contract from the U.S. Air Force for an additional 15 KC-46 Tanker aircraft.

Network & Space Systems (N&SS) first-quarter revenue was $1.6 billion, reflecting lower volume on Commercial Crew. Operating margin was 6.3 percent driven by lower satellite services volume and investments in development efforts. During the quarter, N&SS announced an order for a 702 satellite with a dual payload from SKY Perfect JSAT and Kacific.

Global Services & Support (GS&S) first-quarter revenue was $2.3 billion, reflecting timing of contracts. Operating margin increased to 13.6 percent largely reflecting improved performance. During the quarter, GS&S was awarded a contract from the Republic of Korea Air Force to continue long-term sustainment of F-15 aircraft over the next five years.

Backlog at Defense, Space & Security was $63 billion, of which 34 percent represents orders from international customers.

Additional Financial Information

Table 6. Additional Financial Information

First Quarter

(Dollars in Millions)

2017

2016

Revenues

Boeing Capital

$92

$64

Unallocated items, eliminations and other

$47

$213

Earnings from Operations

Boeing Capital

$39

$5

Unallocated pension/postretirement

$315

$94

Other unallocated items and eliminations

($282)

($166)

Other (loss)/income, net

$22

$26

Interest and debt expense

($87)

($73)

Effective tax rate

25.9%

30.0%

At quarter-end, Boeing Capital’s net portfolio balance was $4.0 billion. Total pension expense for the first quarter was $334 million, down from $629 million in the same period of the prior year. Unallocated items, eliminations and other revenue decreased primarily due to the elimination of intercompany revenue for one aircraft delivered under operating lease. The effective tax rate for the first quarter decreased from the same period in the prior year due to higher-than-expected tax benefits related to share-based compensation in the first quarter of 2017.

Outlook

The company’s 2017 updated financial and delivery guidance (Table 7) reflects continued solid performance across the company and the impact of the lower-than-expected tax rate.

Table 7. 2017 Financial Outlook

Current

Prior

(Dollars in Billions, except per share data)

Guidance

Guidance

The Boeing Company

Revenue

$90.5 – 92.5

$90.5 – 92.5

GAAP Earnings Per Share

$10.35 – 10.55

$10.25 – 10.45

Core Earnings Per Share*

$9.20 – 9.40

$9.10 – 9.30

Operating Cash Flow

~$10.75

~$10.75

Commercial Airplanes

Deliveries

760 – 765

760 – 765

Revenue

$62.5 – 63.5

$62.5 – 63.5

Operating Margin

9.5% – 10.0

9.5% – 10.0

Defense, Space & Security

Revenue

Boeing Military Aircraft

~$11.5

~$11.5

Network & Space Systems

~$7.0

~$7.0

Global Services & Support

~$10.0

~$10.0

Total BDS Revenue

$28.0 – 29.0

$28.0 – 29.0

Operating Margin

Boeing Military Aircraft

~12.0%

~12.0%

Network & Space Systems

~9.0%

~9.0%

Global Services & Support

>12.5%

>12.5%

Total BDS Operating Margin

~11.5%

~11.5%

Boeing Capital

Portfolio Size

Stable

Stable

Revenue

~$0.3

~$0.3

Pre-Tax Earnings

~$0.05

~$0.05

Research & Development

~ $3.6

~ $3.6

Capital Expenditures

~ $2.3

~ $2.3

Pension Expense 1

~ $0.7

~ $0.7

Effective Tax Rate

~ 31.0%

~ 32.0%

1 Approximately ($0.9) billion is expected to be recorded in unallocated items and eliminations

* Non-GAAP measures. Complete definitions of Boeing’s non-GAAP measures are on page 6, “Non-GAAP Measures Disclosures.”

Non-GAAP Measures Disclosures

We supplement the reporting of our financial information determined under U.S. generally accepted accounting principles (GAAP) with certain non-GAAP financial information. The non-GAAP financial information presented excludes certain significant items that may not be indicative of, or are unrelated to, results from our ongoing business operations. We believe that these non-GAAP measures provide investors with additional insight into the company’s ongoing business performance. These non-GAAP measures should not be considered in isolation or as a substitute for the related GAAP measures, and other companies may define such measures differently. We encourage investors to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure. The following definitions are provided:

Core Operating Earnings, Core Operating Margin and Core Earnings Per Share

Core operating earnings is defined as GAAP earnings from operations excluding unallocated pension and post-retirement expense. Core operating margin is defined as core operating earnings expressed as a percentage of revenue. Core earnings per share is defined as GAAP diluted earnings per share excluding the net earnings per share impact of unallocated pension and post-retirement expense. Unallocated pension and post-retirement expense represents the portion of pension and other post-retirement costs that are not recognized by business segments for segment reporting purposes. Pension costs, comprising service and prior service costs computed in accordance with Generally Accepted Accounting Principles in the United States of America (GAAP) are allocated to Commercial Airplanes. Pension costs allocated to BDS segments are computed in accordance with U.S. Government Cost Accounting Standards (CAS), which employ different actuarial assumptions and accounting conventions than GAAP. CAS costs are allocable to government contracts. Other postretirement benefit costs are allocated to all business segments based on CAS, which is generally based on benefits paid. Management uses core operating earnings, core operating margin and core earnings per share for purposes of evaluating and forecasting underlying business performance. Management believes these core earnings measures provide investors additional insights into operational performance as they exclude unallocated pension and post-retirement costs, which primarily represent costs driven by market factors and costs not allocable to government contracts. A reconciliation between the GAAP and non-GAAP measures is provided on page 13.

Free Cash Flow

Free cash flow is defined as GAAP operating cash flow without capital expenditures for property, plant and equipment additions. Management believes free cash flow provides investors with an important perspective on the cash available for shareholders, debt repayment, and acquisitions after making the capital investments required to support ongoing business operations and long term value creation. Free cash flow does not represent the residual cash flow available for discretionary expenditures as it excludes certain mandatory expenditures such as repayment of maturing debt. Management uses free cash flow as a measure to assess both business performance and overall liquidity. Table 2 provides a reconciliation between GAAP operating cash flow and free cash flow.

CHICAGO, April 26, 2017 /PRNewswire/

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