Boeing Co. (NYSE: BA) reported an enormous loss for the fiscal 2019 second-quarter, impacted by a huge charge and enhanced expenses connected to the 737 MAX grounding and related delivery setbacks. Both core loss and revenues missed analysts’ projections by a large percentage. The company also scrapped the previously issued FY19 outlook as it does not reflect the impact of 737 MAX grounding. Following the poor results, the stock lost $13.34 or 3.69% to close at $348.09.
Chicago, Illinois-based Boeing reported second-quarter revenues of $15.76 billion, down 35% from $24.26 billion in the prior-year period. The revenues reflect the negative impact of 737 MAX, offsetting an increase in defense and services volume. On average, analysts surveyed by Thomson Reuters anticipated the aircraft manufacturer to report revenues of $18.55 billion for the reported quarter.
For the quarter ended June, Boeing posted a net loss of $2.94 billion, or $5.21 per share, compared to a net profit of $2.20 billion, or $3.73 per share, in the year-ago period. Excluding charges, core loss for Q2 2019 was $3.75 billion, or $5.82 per share, compared to core earnings of $2.39 billion, or $3.33 per share, in the corresponding quarter last year. The Wall Street analysts anticipated the company to post earnings of $1.87 per share for the quarter.
Commenting on the results, CEO Dennis Muilenburg, said: “This is a defining moment for Boeing and we remain focused on our enduring values of safety, quality, and integrity in all that we do, as we work to safely return the 737 MAX to service. During these challenging times, teams across our enterprise continue to perform at a high level while delivering on commitments and capturing new opportunities driven by strong, long-term fundamentals.”
Boeing said the second-quarter results were negatively impacted by earlier disclosed 737 MAX charges, which trimmed the revenue by $5.60 billion and earnings by $8.74 per share. The company took a charge of $4.9 billion for the worldwide grounding of its 737 Max planes after two lethal crashes resulted in the loss of 346 lives.
The decline in 737 MAX deliveries also affected the quarterly results. Boeing said that it is closely working with the FAA (Federal Aviation Administration) issued guidelines to get approval for the 737 MAX software update and bring the aircraft back to service in a trustworthy manner. The company is also closely working with regulators and clients across the globe to ensure the return of 737 MAX in a safe manner.
The company’s services business revenue was $4.5 billion in the recent quarter, up 11% from $4.1 billion in the year-ago quarter.
Regarding margins in the forthcoming quarters, Boeing said: “The increased 737 program costs will reduce the margin of the 737 programs in the second quarter and in future quarters.”
At the end of the second quarter, the total company backlog stood at a robust $474 billion (5,500 commercial planes), including net orders of $9 billion. At the end of the first quarter, the company had a backlog of 5,600 airplanes worth $487 billion.
Commercial Airplanes’ backlog continues to stay strong with over 5,500 aircrafts worth $390 billion. During the second quarter, Boeing delivered 90 planes, including 42 787s. Furthermore, the company also received orders for two 777 freight aircraft from DHL and six 767 freight aircraft orders from FedEx. In the comparable quarter last year, the company delivered 194 planes. The company said it would issue fresh guidance in the future as there is no specific time frame for the return of 737 MAX aircraft to service.
The poor second-quarter results and unresolved 737 MAX issue is anticipated to keep the stock bearish in the short-term.
Technically, the stock has closed below its 50-day moving average. The stock is facing resistance at 350 levels. Additionally, the MACD indicator also has a negative reading. As a result, we can anticipate the stock to move down in the short-term.
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