Leeham News and Analysis
There's more to real news than a news release.
There's more to real news than a news release.
Leeham News and Analysis
- Bjorn’s Corner: New engine development. Part 4. Propulsive efficiency April 19, 2024
- Boeing unlikely to meet FAA’s 90-day deadline for new safety program April 18, 2024
- Focus on quality not slowing innovation, says GKN April 18, 2024
- Boeing defends 787, 777 against whistleblower charges April 17, 2024
- Dissecting Boeing CEO’s statement next new airplane will cost $50bn April 15, 2024
Boeing 1Q earnings: cash flow, EPS guidance raised on strong results
April 25, 2018: Boeing today said its strong first quarter financial results means it has boosted cash flow and earnings per share guidance.
From its press release:
- Revenue increased to $23.4 billion reflecting 184 commercial deliveries and higher defense and services volume.
- GAAP EPS of $4.15 and core EPS (non-GAAP)* of $3.64 on strong performance across the company.
- Strong operating cash flow of $3.1 billion; repurchased 8.9 million shares for $3.0 billion.
- Backlog grew to $486 billion, including over 5,800 commercial aircraft.
- Cash and marketable securities of $9.9 billion provide strong liquidity.
- Operating cash flow, EPS and Commercial Airplanes margin guidance increased on performance.
The conference call is today at 10:30 Eastern time. The webcast may be heard here.
Giving away all those 787’s is taking its toll on the operating margins. 😉
“Core operating margin rose to 10.7 percent from 8.5 percent a year earlier while revenue rose 6.5 percent to $23.38 billion”
https://finance.yahoo.com/news/boeing-profit-rises-57-percent-113716320.html
It’ll be very interesting to see if they talk about their RR-powered 787 “Gliders”, and their impact on inventory, profits, and cash flow.
And GE9x delay. And CFM-56-7B AD. And NMA, which should be nearing ATO.
Ah, read during the GE9X delay back in February, there was at least a 6 month “cushion” available for it. One month later, delay over, aerial testing started. Ground icing testing completed. Doesn’t sound like it’s an issue, certainly for right now.
Any discussion on the KC46 delays. Will they bury a further cash charge for the project.
All those KC46s which cant be delivered, but were built to schedule
Also, 787 deferred costs dip below 25 billion for the first time, for those who obsess over this paperwork.
Yes, I Tweeted the other day at assuming this level of reduction over 14/mo, it will clear the deferred production costs in 64 years. Deferred tooling on top of this, however.
Aawk! that’s 6point4 6.4 years.
64 years to cut 24 billion out at a rate of 800 million a quarter? I think you accurately stated it would, at the present rate (which is accelerating) clear by 2024-2025 or so. (Maybe you meant to say quarters, above.) Some of that tooling will probably also be used in other programs, and it’s not wise to depreciate it early, unless they need somehow to decrease profits/taxes now.
In truth, I anticipate production/sales, and efficiencies, to “surprisingly” increase over the next 10 years beyond present levels. The 330NEO and 359 are only barely bracketing the 787, which will be due for a “MAX” once NMA is in assembly.
Oops that should be 6.4 years. A little bit of difference.
Uh, 64 years is ridiculous.
Deferred Production Cost from Boeing website:
4Q17: $25.358 billion
1Q18: $24.690 billion
This indicates a reduction of $668 million during 1Q18.
Crude Estimate assuming production rate stays the same: $24.690B / $668M = 37 quarters = 9.2 years
@Mike, as noted, that should have been 6.4 years.
Yeah, I saw that your change got posted during the time it took me to write my response.
If you include tooling & NRE it actually is slightly better because they are reducing this relatively faster than the deferred production cost.
Deferred Production Cost plus Tooling & NRE from Boeing website:
4Q17: $28.531 billion
1Q18: $27.732 billion
This indicates a reduction of $799 million during 1Q18.
Crude Estimate assuming production rate stays the same: $27.732B / $799M = 34.7 quarters = 8.7 years
based on 8.7 years and assuming 14 per month over all that time. ( not up to that level yet)
We get very close to 100 months or 1400 planes delivered. Allowing for over estimate of production rate, say 1200 planes to go.
Deliveries are 675 so we could be looking at actual production block of 1875 ?.
Some people have made the mistake of counting all 787 revenue to Boeing as though it doesnt have major suppliers who have to be paid- wings , engines, fuselage sections, nose section etc.
Strong operating cash flow of $3.1 billion; repurchased 8.9 million shares for $3.0 billion.
If there were no ulterior motive, this would indicate that Boeing can’t find any better investment than giving the money back to shareholders. The people who sold those shares can then find a new investment (more profitable ?) that isn’t Boeing.
Is there any other business reason to buy back shares ?
Clearly it does support and enhance the value of the existing shares at the expense of future growth, so short term it is good for current shareholders, or holders of options.
I was about to comment on this. Boeing should not try to make us believe they are tight on cash to develop the NMA if too much available cash is allocated to share buybacks.
On the other hand, share buybacks drive the share price up, which is not only good for all shareholders, but especially so for upper management stock option plans.
The problem as I see it, is that it supports the short term share price of the company, but reduces investment for the longer term.
However, if the board isn’t presented with some profitable investment options from within, and can’t see a synergistic business it could buy, it is much better for the board to decide to essentially give the money back to the shareholders.
There is another consideration in these days of low interest rates. If you need money it is good to borrow it. That won’t last forever.
Its more tax efficient ( or was as recent tax cuts may change it) to buy shares back than provide bigger dividends.
@Robert Wilkinson,
While I believe Boeing could’ve kept the money and used it for other purposes, (some) buyback does have value.
1)Decreases the amount of “float”.
2)If I’m not mistaken, Boeing does offer “stock-based” compensation as well for employees so it needs those shares from somewhere.
Funny how people here (and another website) have been hawking how “Boeing is giving away their B787’s”….hopefully this should give them a “shut-up call”.
6.4 years (or even 8.7 years) isn’t too bad. I see the B787 selling for at least another decade so by the end, it should be profitable endeavor for Boeing.
Kind Regards.
Somebody better qualified than me could give a definitive answer, but I believe the stock and stock options given to employees is not registered stock, and therefore has to be sold under some exemption, such as Rule 144 (which I think then makes it stock that can then be freely traded)
Whether the registered stock that they buy back could be used for that purpose is another issue. I don’t know how that stock is accounted for.
It is extremely important for investors to review the guidance (esp. revenue and EPS guidance) before making any investment decisions, as their future returns depend on the upcoming revenues and earnings. One can see revenue and EPS guidance and expected growths at http://www.alamg.com just by entering stock symbols.