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Aircraft-helicopters. Boeing: 2018 results and 2019 guidance

Commercial aircraft, defense, space and security, global services

Boeing announced the results for 2018 and forecasts for 2019.

The highlights:

Fourth Quarter 2018

Record revenue of $28.3 billion and record operating profit of $4.2 billion driven by higher volume

Record GAAP EPS of $5.93 and record core EPS (non-GAAP) of $5.48 on strong performance

Full-Year 2018

Record revenue of $101.1 billion reflecting strong growth across the portfolio

Record GAAP EPS of $17.85 and record core EPS (non-GAAP) of $16.01 driven by solid execution

Record operating cash flow of $15.3 billion; repurchased 26.1 million shares for $9.0 billion

Total backlog remains robust at $490 billion, including nearly 5,900 commercial airplanes

Cash and marketable securities of $8.6 billion provide strong liquidity

Outlook for 2019

Revenue guidance of between $109.5 and $111.5 billion reflects higher volume across all businesses

GAAP EPS of between $21.90 and $22.10; core EPS (non-GAAP) of between $19.90 and $20.10

Operating cash flow expected to increase to between $17.0 and $17.5 billion.


The Boeing Company reported fourth-quarter revenue of $28.3 billion, GAAP earnings per share of $5.93 and core earnings per share (non-GAAP) of $5.48, all company records. These results reflect record commercial deliveries, higher defense and services volume and strong performance which outweighed favorable tax impacts recorded in the fourth quarter of 2017. The company generated operating cash flow of $2.9 billion, repurchased 1.6 million shares for $0.6 billion, paid $1.0 billion of dividends and completed the acquisition of KLX.

Revenue was a record $101.1 billion for the full year reflecting higher commercial deliveries and increased volume across the company. Records for GAAP earnings per share of $17.85 and core earnings per share (non-GAAP)* of $16.01 were driven by higher volume, improved mix and solid execution.

Operating cash flow was $2.9 billion in the quarter and $15.3 billion for the full year, reflecting planned higher commercial airplane production rates and strong operating performance as well as timing of receipts and expenditures. During the quarter, the company repurchased 1.6 million shares for $0.6 billion, paid $1.0 billion in dividends, and completed the acquisition of KLX. For the full year, the company repurchased 26.1 million shares for $9.0 billion and paid $3.9 billion in dividends. Based on strong cash generation and confidence in the company's outlook, the board of directors in December increased the quarterly dividend per share by 20 percent and replaced the existing share repurchase program with a new $20 billion authorization. 

Cash and investments in marketable securities totaled $8.6 billion, compared to $10.0 billion at the beginning of the quarter. Debt was $13.8 billion, up from $11.9 billion at the beginning of the quarter primarily due to the issuance of new debt following the KLX acquisition.

Total company backlog at quarter-end was relatively unchanged at $490 billion and included net orders for the quarter of $27 billion.

Segment Results

Commercial Airplanes

Commercial Airplanes fourth-quarter revenue increased to $17.3 billion reflecting higher deliveries and favorable mix. Fourth-quarter operating margin increased to 15.6 percent, driven by higher 737 volume and strong operating performance on production programs, including higher 787 margins.

During the quarter, Commercial Airplanes delivered 238 airplanes, including the delivery of the 787th 787 Dreamliner and the first 737 MAX Boeing Business Jet. The 737 program delivered 111 MAX airplanes in the fourth quarter, including the first MAX delivery from the China Completion Center, and delivered 256 MAX airplanes in 2018. The first 777X flight test airplane completed final body join and power-on, and the program remains on track for flight testing this year and first delivery in 2020.

Commercial Airplanes booked 262 net orders during the quarter, valued at $16 billion. Backlog remains robust with nearly 5,900 airplanes valued at $412 billion.

Defense, Space & Security

Defense, Space & Security fourth-quarter revenue increased to $6.1 billion driven by increased volume across F/A-18, satellites, and weapons. Fourth-quarter operating margin increased to 10.9 percent, primarily reflecting favorable mix.

During the quarter, Defense, Space & Security was awarded contracts for the second KC-46 Tanker to Japan, a joint ground system to provide tactical satellite communications for the US Air Force and to modernize 17 Chinook helicopters for Spain. Defense, Space & Security also completed a successful test for the US Air Force's Minuteman III and unveiled the SB>1 DEFIANT helicopter for the US Army. In January, the first two KC-46 Tankers were delivered to the US Air Force.

Backlog at Defense, Space & Security was $57 billion, of which 30 percent represents orders from customers outside the US.

Global Services

Global Services fourth-quarter revenue increased to $4.9 billion, primarily driven by higher parts volume including the acquisition of KLX. Fourth-quarter operating margin increased to 15.0 percent reflecting improved performance, partially offset by higher period costs.

During the quarter, Global Services was awarded Performance Based Logistics contracts for C-17 and F-22 for the US Air Force and F-15 for Qatar as well as contracts for F/A-18 services for the US Navy. Global Services was also selected by Shenzhen Airlines to provide crew management solutions, making them the first airline in China to utilize Boeing AnalytX-powered services. Significant milestones during the quarter included the first KC-46 training flight with the US Air Force. In addition, Global Services successfully began integrating KLX and began operations of the Auxiliary Power Unit joint-venture with Safran.

Outlook

Effective in the first quarter of 2019, the Company is making a change to the accounting for military derivative aircraft. Revenues and costs associated with military derivative aircraft were previously reported in the Commercial Airplanes and Defense, Space & Security segments. Beginning in 2019, all revenues and costs associated with military derivative aircraft will be reported in the Defense, Space & Security segment. An additional exhibit is included on page 15 with restated 2018 results adjusted for the change in accounting for military derivative aircraft as well as the realignment of certain programs between Global Services and Defense, Space & Security. The Company has provided this comparable information in the exhibit and below to help investors understand the 2019 financial outlook.

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