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What's Next For Boeing?

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Recent 737 MAX fatal crashes took its toll on the defense and aerospace giant Boeing Co.'s (BA) 100-year-plus legacy that is built on the foundation of developing, producing, and supporting safe products.

In an effort to cope up with the 737 MAX impacts, Boeing has planned to cut 737 MAX production by 20% and continues to make steady progress on a 737 MAX software update, with over 135 test and production flights of the software update complete.

Boeing Chairman, President and Chief Executive Officer Dennis Muilenburg, said, "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."

The Stock In Focus

Boeing is the world's largest aerospace company and leading manufacturer of commercial airplanes and defense, space and security systems. The top U.S. exporter, Boeing supports airlines and U.S. and allied government customers in more than 150 countries.

This Chicago, Illinois-based company operates in three business units: Commercial Airplanes; Defense, Space & Security; and Boeing Global Services, which began operations on July 1, 2017. Boeing Capital Corp., a global provider of financing solutions, supports these business units.

The company's products and tailored services include commercial and military aircraft, satellites, weapons, electronic and defense systems, launch systems, advanced information and communication systems, and performance-based logistics and training. With corporate offices in Chicago, Boeing employs more than 153,000 people across the United States and in more than 65 countries.

737 MAX Impact

Following two recent fatal 737 MAX accidents, Boeing announced its plan to reduce the production rate from 52 aircraft per month to 42 per month effective April 15, 2019. Further, the company has been engaging global regulators and customers on safe return to service of the 737 MAX.

"With safety as our clear priority, we have completed all of the engineering test flights for the software update and are preparing for the final certification flight," said Boeing Chairman, President and Chief Executive Officer Dennis Muilenburg. "We're committed to providing the FAA and global regulators all the information they need, and to getting it right. We're making clear and steady progress and are confident that the 737 MAX with updated MCAS software will be one of the safest airplanes ever to fly. The accidents have only intensified our commitment to our values, including safety, quality and integrity, because we know lives depend on what we do."

May Deliveries Down 56%

Amid 737 MAX grounding woes, the deliveries of Boeing jets plummeted 56% from last year. The company delivered 30 commercial airliners in May versus 68 it delivered last year.

Rival Airbus delivered 81 aircraft during the month of May. Taking the latest orders and deliveries into account, Airbus' backlog of jetliners remaining to be delivered as of 31 May stood at 7,207 aircraft.

Q1 Performance

March 2019, Boeing reported first-quarter net income of $2.15 billion or $3.75 per share compared to $2.48 billion or $4.15 billion last year.

Non-GAAP core earnings per share was $3.16 compared to $3.64 earned in the same period of last year.

Total revenues declined to $22.9 billion from $23.4 billion generated a year ago, reflecting lower deliveries primarily due to the 737 MAX grounding.

The company, however, saw healthy widebody orders in the quarter, and its backlog remains robust at more than 5,600 airplanes worth $399 billion.

Cautiously Optimistic View

The company expects its financial results to continue to be adversely impacted until it safely return the 737 MAX to service, ramp up production rates and resume deliveries to customers.

However, Boeing continues to see healthy global demand for its offerings in commercial; defense, space; and services. The company claims that these are sizable sectors that are growing and backed by strong fundamentals, with a combined market opportunity of $8.1 trillion over the next 10 years.

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