Boeing's Profit Falls 21% As 737 Max Crisis Hammers Financials
The Boeing Company continues to reel from the crashes of two 737 MAX 8 jetliners, with earnings plunging 21 percent in the first quarter and losses exceeding $1 billion attributable to this fiasco.
The world's largest planemaker reported both lower revenue and profits compared to a year ago. Before the crash of an Ethiopian Airlines 737 MAX 8 in March and the subsequent ground of all MAX lanes worldwide, Boeing expected to report improved results in the quarter.
As a consequence of all these negative factors, Boeing said it can no longer stand behind its earlier outlook predicting results to results improve by year-end.
Boeing reported first-quarter revenue of $22.9 billion, GAAP earnings per share of $3.75 and core earnings per share (non-GAAP) of $3.16. These figures reflected lower 737 deliveries partially offset by higher defense and services volume. Boeing generated operating cash flow of $2.8 billion and paid $1.2 billion of dividends.
Overall profits fell 13.2 percent to $2.1 billion. Earnings from operations increased by 12% to $847 million compared to the same period last year. Operating margin was up 1.1 points to 12.8%, reflecting gains from property sales partially offset by unfavorable mix.
Boeing said the previously issued 2019 financial guidance does not reflect 737 MAX impacts.
"Due to the uncertainty of the timing and conditions surrounding return to service of the 737 MAX fleet, the new guidance will be issued at a future date," said Boeing in a statement.
Boeing claims it's making steady progress on the path to final certification for a software update for the 737 MAX. It announced the completion of 135 test and production flights of the software update.
It continues to work closely with global regulators and airline partners to comprehensively test the software and finalize a package of training and educational resources.
"Across the company, we are focused on safety, returning the 737 MAX to service, and earning and re-earning the trust and confidence of customers, regulators, and the flying public," said Boeing Chairman, President, and CEO Dennis Muilenburg.
"As we work through this challenging time for our customers, stakeholders and the company, our attention remains on driving excellence in quality and performance and running a healthy sustained growth business built on strong, long-term fundamentals."
Muilenburg said he couldn't comment on the ongoing investigation into Boeing's role in the two crashes of its 737 MAX, but said he's confident there was no slip or gap in the certification process by Boeing or aviation authorities that led to the crashes.
"We're very confident that when the fleet comes back up, the Max will be one of the safest airplanes ever to fly," he said.
Boeing said its backlog of orders stands at $487 billion for more than 5,600 commercial jets. It had $7.7 billion in cash on hand as of the end of March.