A surprise to no one, Boeing on Wednesday swung to a loss in its second quarter on massive charges related to its 737 commercial aircraft program, which also led to a precipitous decline in sales, but the negatives were partially offset by gains in the company’s defense and services businesses.
Regulatory authorities and airlines worldwide have grounded the fleet of 737 MAX aircraft until Boeing can complete fixes that caused two catastrophic crashes last year and earlier this year. The company also is making software updates unrelated to the sensor issues that caused the crashes.
The net loss in the quarter was $2.9 billion, $5.21 earnings per share (EPS), from $2.2 billion ($3.73 EPS) in net income a year ago, but still beat consensus estimates that anticipated a loss of $6.69 per share. Last week Boeing said it would take a $4.9 billion ($8.74 EPS) after-tax charge in the second quarter related to its estimate of potential costs of the 737 MAX grounding and delivery delays.
Boeing’s defense business delivered strong results, with sales up 8% to $6.6 billion on higher volume for aircraft, satellites, and weapons, while operating income rose 159% to $975 million on a property sale and lower cost growth on the Air Force KC-46 refueling tanker.
Total backlog at the end of the quarter stood at $474.3 billion, down from $490.5 billion at the end of 2018. Defense backlog stood at $63.9 billion, up from $61.3 billion in December, and the business took in $4 billion in orders.
Free cash in the quarter was an outflow of $1 billion. Despite the financial challenges stemming from the 737 woes, Boeing paid its shareholders $1.2 billion in dividends.
Boeing, under a $350 million contract from the Pentagon, had competed with Northrop Grumman to design the next-generation Ground-Based Strategic Deterrent (GBSD) intercontinental ballistic missile. However, the company said this week it would not bid on the follow-on engineering and manufacturing development contract for the new missile fleet.
