As expected, Boeing on Wednesday reported lower sales and earning stemming from a halt in deliveries and flights of its 737 MAX passenger aircraft but the pain from that issue was softened by gains in the defense and services segments.
“I want to be very clear, when it comes to resource questions and applications of resources, our top priority is the safe return to service of the 737 MAX,” Dennis Muilenburg, chairman, president, and CEO of Boeing, told investors on the company’s analyst call.
Regulatory authorities and airlines have grounded the 737 MAX following two crashes of the aircraft in the past six months that resulted in hundreds of fatalities. The crashes have been linked in part to a sensor aboard the aircraft that malfunctioned.
Net income in the quarter tumbled 13 percent to $2.1 billion, $3.75 earnings per share (EPS), from $2.5 billion ($4.15 EPS) a year ago. Excluding pension adjustments, core earnings fell 21 percent to $2 billion ($3.16 EPS), short of consensus estimates by three pennies a share.
Sales dipped 2 percent in the quarter to $22.9 billion from $23.4 billion a year ago.
The defense segment’s operating income rose 12 percent to $847 million, largely on a property sale, and program performance, Smith said. The sale of excess property is part of ongoing efforts to rationalize the company’s footprint, he said. Segment margin increased 110 basis points to 12. 8 percent.
Defense sales increased 2 percent to $6.6 billion on higher volume in satellites, weapons and surveillance aircraft. The defense segment booked $12 billion in orders in the quarter and backlog stood at $66.8 billion, up 9 percent from $61.3 billion at the end of 2018. International business made up 31 percent of backlog.
Boeing, which built the existing fleet of nuclear-tipped Minuteman III intercontinental ballistic missiles, is competing with Northrop Grumman to design the next generation of ICBMs under the Pentagon’s Ground-Based Strategic Deterrent program.
Boeing and Northrop Grumman are nearing the end of a competition to design GBSD under three-year missile design contracts awarded in 2017 and respectively worth $350 million and $330 million. House Armed Services Committee Chairman Adam Smith (D-Wash.) has proposed freezing the GBSD program and instead upgrading the Minuteman III fleet for further service.
