Grounded (BA Earnings)
Boeing (BA) is set to report Q1 results tomorrow before the open (last quarter they released at 7:30am ET) with a call to follow at 10:30am ET.
The CapitalIQ consensus estimate for Q1 core EPS (non-GAAP) is $3.19 and for revenue it's $23.04 bln.
BA has beaten consensus estimates for ten quarters in a row, with double digit EPS beats eight of those 10 times. In Q4, BA reported a huge $0.93 EPS beat.
The 737 MAX issues will be front-and-center. Investors will want an update on the timeline for when these planes will get back in the air and investors will want to know what impact this is having on backlog.
TECHS:
After a monster move from December to early March when it hit $446, the stock has pulled back and has been rangebound between the 200D and the 50% retrace (360-400). The recent weakness appears related to the 737 MAX troubles.
RESULTS:
Boeing misses by $0.03, reports revs in-line, suspends full year guidance; says it's making steady progress on the path to final certification for a software update for the 737 MAX
Reports Q1 (Mar) core earnings of $3.16 per share, excluding non-recurring items, $0.03 worse than the S&P Capital IQ Consensus of $3.19; revenues fell 2.0% year/year to $22.92 bln vs the $23.04 bln S&P Capital IQ Consensus.
Commercial Airplanes segment revenue in Q1 fell 9% to $11.8 bln reflecting lower 737 deliveries partially offset by favorable mix.
Co says its previously issued 2019 guidance does not reflect 737 MAX impacts. Due to the uncertainty surrounding return to service of the 737 MAX fleet, new guidance will be issued at a future date. The previously issued 2019 guidance does not reflect 737 MAX impacts.
Update on 737 MAX Issues: Boeing says it's making steady progress on the path to final certification for a software update for the 737 MAX, with over 135 test and production flights of the software update complete. The company continues to work closely with global regulators and its airline partners to comprehensively test the software and finalize a robust package of training and educational resources.
Co says Q1 was highlighted by key defense wins, strong commercial widebody performance and orders, continued robust services growth, and receiving Embraer shareholder approval for the proposed strategic partnership.
CONFERENCE CALL NOTES:
Co feels the loss of the gravity of the 737 MAX accidents. Nothing is more important than safety. Co is committed to re-earning trust. "We own it."
Co has been working with regulators on a software update to make the 737 MAX the safest plane in the sky. Nearly 90% of MAX operators have participated in session with new software.
First order of business is to return the 737 MAX to service. Co has been diverting resources to this effort. Co is focused on the MAX, that's the top priority, CEO is on daily engagements with teams. Resources have been prioritized accordingly. Co is working with FAA and regulatory authorities around the world. FAA has shown leadership on this issue.
Boeing is seeing healthy global demand. In commercial aviation, traffic continues to grow faster than long term trends. Demand view remains unchanged, co remains highly confident. Long term, BA sees a doubling of the size of the global fleet. Co is seeing more stable replacement purchases.
Co delivered 50 fewer 737 planes than planned due to the MAX issues. Until it has clarity on the return of MAX to service, BA has paused its share buyback plans.
Co saw healthy wide-body orders in the quarter. 787 has smoothly increased to 14 planes per month.
Q&A:
MAX having an impact on 777x? Co has not seen nay direct impact. Looking to get 777X into flight testing this year, still plans on delivering these planes in 2020.
How did this happen? There is no technical slip or gap here. Both accidents were a series of events. Co says it understands its airplane and remains fully confident but there are areas to improve. There was no surprise or gap that slipped thru the certification process. Co has taken the time to understand that which has led to the software update. MAX will be one of the safest airplanes ever to fly once it's back up and running.
Both accidents saw a chain of events and the MCAS was a common link with erroneous angle of attack data. Co has great confidence with software update. CEO has flown on two of these test flights. Next step is FAA certification. Then goal would be bringing all global regulators together and return the plane to service. Co will take time to do it right. Customers are eager to get the MAX back in service.
Details on the $1 bln of cost for MAX? The main part of this is the lower production rate. Co has held factory headcount despite lowered production.
Courtesy of briefing.com
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