Aerospace and defense giant Boeing Co. (BA) on Wednesday reported a profit for the fourth quarter compared to a loss in the same period last year, aided by a 42% surge in revenues, while the year-ago results were negatively impacted by a labor strike and a charge on the 747 program.
However, the company forecast earnings for fiscal year 2010 below analysts' consensus estimate, citing lower volumes related to production rate for 777 and reduced scope on defense programs. The company also forecast lower aircraft deliveries for the full year.
Boeing's net income for the fourth quarter was $1.27 billion or $1.75 per share, compared to net loss of $86 million or $0.12 per share in the same period last year.
Net earnings from continuing operations for the latest quarter was $1.28 billion or $1.77 per share, compared to net loss from continuing operations of $86 million or $0.12 per share in the year-ago period. On average, twenty three analysts polled by Thomson Reuters expected the company to report earnings of $1.36 per share for the quarter. Analysts' estimates typically exclude special items.
Total revenues for the quarter surged 42% to $17.94 billion from $12.66 billion in the prior-year quarter. Analysts had a consensus revenue estimate of $17.57 billion for the quarter.
The company's operating margin for the quarter was 9.4%, compared to a negative 1.9% in the year-ago quarter. Total company backlog at quarter-end was $316 billion, down 1% from $320 billion in the preceding third quarter, as backlog for both Commercial Airplanes and Defense, Space & Security segments declined during the period.
Operating cash flow for the quarter was $3.21 billion compared to negative operating cash flow of $1.64 billion in the year-ago period. The cash flow for the quarter includes higher cash receipts than the strike-affected period a year ago, partially offset by continued investment in development programs. The company had earlier said it expected cash flow to be greater than $2.5 billion, including discretionary pension contributions of about $0.5 billion and an assumption of $0.8 billion for new commercial airplane financings.
Cash and investments in marketable securities totaled $11.2 billion at the end of the fourth quarter, up 70% from $6.6 billion at the end of the preceding third quarter. Total consolidated debt at the quarter-end was $12.9 billion, up from $11.0 billion at the end of the previous quarter.
Boeing operates in five segments: Commercial Airplanes, Boeing Military Aircraft, Network and Space Systems, Global Services and Support, and Boeing Capital Corporation.
At Boeing Commercial Airplanes or BCA, fourth-quarter revenues doubled to $9.18 billion from $4.59 billion last year on higher airplane deliveries. A labor strike reduced revenue in the year-ago period by an estimated $4.3 billion. Boeing delivered 122 commercial airplanes in the fourth quarter, up from 50 in the prior-year period and 113 in the preceding third quarter.
Commercial Airplanes booked 82 gross orders during the fourth quarter, while 20 others were removed from its order book. Contractual backlog was for 3,375 airplanes valued at $250 billion, more than seven times the unit's 2009 revenue. However, the contractual backlog value was down from $278.6 billion at the end of the prior year.
Boeing's 787 Dreamliner was originally scheduled to enter service in May 2008, but production had been delayed multiple times. The aircraft's maiden flight, originally planned for September 2007, took place on December 15, 2009.
The 787 program entered flight testing during the fourth quarter with the first two airplanes completing first flights. Boeing said that remaining four flight-test airplanes are expected to be flying by the end of the second quarter. Further, the company said that first delivery is scheduled for the fourth quarter of 2010. Total firm orders for the 787 at quarter-end were 851 airplanes from 56 customers.
Boeing added that the 747-8 program expects its first flight in the near future which will begin the flight-test phase of the program. Initial delivery is expected in the fourth quarter of 2010.
Boeing Defense, Space & Security's revenue for the quarter increased 6% to $8.55 billion from $8.04 billion last year, on increased military aircraft deliveries and higher volume in services.
Boeing Military Aircraft fourth-quarter revenue rose 19% from a year ago to $3.73 billion reflecting higher aircraft deliveries, improved delivery mix and strong execution across its programs, partially offset by higher costs on the AEW&C program. At Network & Space Systems, quarterly revenues declined 17% from the prior-year quarter to $2.39 billion primarily due to lower volume on combat systems and missile defense. Global Services & Support or GS&S revenues increased 19% from the year-ago period to $2.43 billion on higher volume across its broad portfolio of services and logistics products.
Boeing Capital Corporation or BCC reported fourth-quarter pre-tax earnings of $14 million, down 26% from $19 million in the same period last year. Revenues declined 2% from last year to $164 million.
For fiscal year 2009, Boeing's net earnings dropped to $1.31 billion or $1.84 per share from $2.67 billion or $3.67 per share in the previous year. Earlier, Boeing had projected earnings for the year in a range of $1.35-$1.55 per share. The results for the latest year include charges of a combined $3.58 per share from previously announced 787 and 747 events in Commercial Airplanes. The prior year's results include a a combined $2.56 per share impact primarily due to a labor strike and charges on the 747 program. Net earnings from continuing operations for the year were $1.34 billion or $1.87 per share, down from $2.65 billion or $3.65 per share in the same period last year.
Total revenues for the year rose to $68.28 billion from $60.91 billion a year ago on higher commercial deliveries and growth in Defense, Space & Security. The company had earlier forecast revenue for the year in a range of $68 billion-$69 billion. Jim McNerney, chairman, president and chief executive officer of Boeing said, "We put a strong finish on 2009 by getting the 787 in the air and generating solid core operating performance across the company. Focus areas for 2010 are to continue our strong operational performance, certify and deliver the 787 and 747-8, and further reposition our defense, space and security business."
Operating cash flow for the full year was $5.60 billion, compared to negative operating cash flow of $401 million last year.
Boeing delivered 481 commercial aircraft during the year, up from 375 aircraft in the prior year, and in line with the company's delivery guidance between 480 and 485 airplanes.
Total contractual backlog as at December 31, 2009 was $296.5 billion, down from $323.9 billion a year ago and $298.9 billion at the end of the third quarter. Total backlog was $315.6 billion, down from $352.0 billion at the end of the prior year and $320 billion at the end of the third quarter.
For fiscal year 2010, Boeing forecasts earnings in a range of $3.70-$4.00 per share, reflecting the previously announced 777 production rate reduction, reduced scope on Army modernization and missile defense programs, and some consideration for development program and market risks. Analysts expect the company to report earnings of $4.26 per share for the year.
The company projects revenues for the year in a range of $64 billion-$66 billion. Analysts expect revenues of $65.42 billion for the year.
Operating cash flow for the year is expected to be approximately zero, including less than $100 million of pension contributions, as Boeing continues to build inventory on key development programs.
Commercial Airplanes' delivery guidance for the year has been set at between 460 and 465 airplanes, reflecting fewer twin-aisle deliveries, and is sold out. It includes the first few 787 and 747-8 deliveries, which are expected to begin in the fourth quarter. This compares to aircraft de4liveries of 481 during 2009.
The unit's 2010 revenue for the year is expected to be $31 billion-$32 billion, with operating margins expected between 6.5% and 7.5%
Boeing expects full-year revenue for the Defense, Space & Security segment to be $32 billion to $33 billion, with operating margins of approximately 10%. Boeing Capital Corp. expects that its aircraft finance portfolio will continue to reduce as its expected new aircraft financing for 2010 is less than $0.5 billion, below normal portfolio runoff through customer payments and depreciation. Boeing's R&D forecast for the year is in a range of $3.9 billion-$4.1billion and is expected to decrease significantly in 2011. Meanwhile, capital expenditures for 2010 are expected to be about $1.9 billion, reflecting the bulk of capital investments required for the second 787 assembly line in South Carolina. Capital expenditures in 2011 are expected to be lower than in 2010. Further ahead, for fiscal year 2011, Boeing expects revenues to be higher than 2010, driven by higher estimates of 787 and 747-8 deliveries. Operating cash flow for the year is expected to be greater than $5 billion.
Among Boeing's peers, Lockheed Martin Corp. (LMT) is slated to announce its fourth-quarter results on January 28. Wall Street analysts forecast earnings of $1.99 per share for the quarter on revenues of $12.47 billion. In early January, Lockheed Martin announced the formation of a new Mission Systems & Sensors business unit, realigning two of its prior standalone businesses in Electronic Systems, the former Maritime Systems & Sensors and Systems Integration - Owego. As a result of the integration, the company expects to eliminate about 1,200 U.S. positions from the business.
Another rival, Northrop Grumman Corp.'s (NOC) fourth-quarter results are set to be released on February 4. Analysts are of the view that the company will earn $1.26 per share for the quarter with revenue estimate of $9.00 billion.
In Wednesday's regular trading session, BA is trading at $59.59, up $1.88 or 3.26% on a volume of 0.18 million shares. In the past 52 weeks, the stock has traded in a range of $29.05-$62.31.
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