Boeing (BA) reported a better-than-expected loss in Q1 but revenue missed views early Wednesday, as production forecasts for the 737 Max, 787 Dreamliner and 777 were trimmed further amid the aviation market collapse. Boeing stock rose.
XBoeing Earnings Report
Estimates: Analysts expect a per-share loss of $2.04 vs. a per-share profit of $3.16 in the year-ago-quarter. Revenue is seen falling 25% to $17.17 billion.
Results: Per-share loss of $1.70, though that missed other estimates of $1.61, on revenue of $16.91 billion. Operating cash flow was negative $4.3 billion. Boeing plans to cut payroll by about 10% through voluntary layoffs and "involuntary layoffs as necessary," according to a company memo obtained by CNBC.
Cash and equivalents swelled to $15.5 billion from $10 billion in Q4, while debt grew to $38.9 billion from $27.3 billion. Boeing said it is "exploring all of the available options" to obtain additional liquidity.
Commercial unit revenue sank 48% to $6.2 billion. Boeing earlier reported Q1 commercial deliveries sank 66% to 50 as well as 150 net order cancellations, bringing the total order count to a negative 144 aircraft.
On Wednesday, Boeing said expected regulatory approvals should allow 737 Max deliveries to resume in Q3, later then prior view for mid-2020. The coronavirus has also slowed the planned production ramp up for the 737 Max, which "will resume at low rates in 2020 as timing and conditions of return to service are better understood and gradually increase to 31 per month during 2021, with further gradual increases to correspond with market demand."
Additional costs related to the suspension of 737 Max production have grown by $1 billion and now total $5 billion. Meanwhile, 787 production will slow from 14 per month to 10 in 2020, and seven by 2022. The 777/777X combined production rate will be reduced to three per month in 2021.
The coronavirus is delaying key certification tasks so the Boeing 737 Max isn't likely to get Federal Aviation Administration to resume flights until August or later, sources told the Wall Street Journal earlier this month. The FAA still hasn't approved two software fixes to the 737 Max's flight control software.
Global services revenue was flat at $4.6 billion. Defense and space unit revenue fell 8% to $6.4 billion, and the segment booked a pre-tax charge of $827 million for the KC-46 tanker, which has cost Boeing more than $3 billion in cost overruns.
Boeing Stock
Shares rallied 4.4% to 137.05 in premarket trading on the stock market today. Boeing stock remains below its 50- and 200-day lines, according to MarketSmith analysis. Top Boeing 737 Max supplier Spirit AeroSystems (SPR) rose 6% and engine supplier General Electric (GE) lost 3.4% after reporting earnings.
At Boeing's shareholder meeting Monday, CEO Dave Calhoun said that air travel demand likely won't recover for another two to three years. He also revealed that Boeing will offer voluntary layoffs in June and expects "several thousand" will take them or retire.
Calhoun also said "It will be years" before Boeing stock will pay dividends again, and added that the priority will be on repaying loans instead of resuming buybacks. Boeing recently drew down the full amount of a $13.8 billion loan as its cash flow dwindles.
Last month, Boeing suspended its dividend and indefinitely extended a pause on buybacks, which began last year.
On Saturday, Boeing also confirmed it canceled its $4.2 billion agreement with Brazil's Embraer (ERJ) to form a joint venture with its commercial aircraft unit. That tie-up came after rival Airbus (EADSY) took over Bombardier's C Series narrowbody jets, now dubbed the A220.
But Embraer said Boeing wrongfully terminated the agreement, adding that it will "pursue all remedies" against the company.
Meanwhile, federal investigations into the Boeing 737 Max are reportedly wider than previously known. Building on probes into the Maneuvering Characteristics Augmentation System, the latest Justice Department inquiry focuses on quality control issues at Boeing's factories, sources told the Wall Street Journal.
Follow Gillian Rich on Twitter @IBD_GRich for aviation news and more.
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