01—Abstract
Summary
Summary of the 10-Q filed July 26, 2017. Cited figures are marked; the original filing is the authoritative source.
Boeing's Q2 2017 10-Q filing shows a significant rebound in profitability compared to the prior year, driven by strong performance in both its Commercial Airplanes (BCA) and Defense, Space & Security (BDS) segments.
Total revenues decreased year-over-year, primarily due to fewer aircraft deliveries in the BCA segment. However, earnings from operations and net earnings saw substantial improvements, largely attributable to reduced reach-forward losses on key programs like the 747 and KC-46A Tanker, and the reclassification of certain 787 costs. The company also highlighted positive trends in its backlog, which increased due to new orders and funding exceeding deliveries.
Key financial metrics indicate a healthier operational performance. Diluted EPS for the quarter and year-to-date significantly surpassed the previous year's figures, reflecting the improved earnings.
The company continued its capital return strategy through share repurchases and dividend payments. Despite the positive earnings trend, investors should note potential risks related to program cost overruns, government budget uncertainties, and supply chain management, as detailed in the company's risk factors and forward-looking statements.
02—Key points
Key Highlights
- Total revenues for the six months ended June 30, 2017, were $43.7 billion, a decrease from $47.4 billion in the same period of 2016, primarily due to fewer Commercial Airplanes deliveries.
- Net earnings significantly increased to $3.21 billion for the six months ended June 30, 2017, compared to $985 million in the prior year, driven by improved segment performance and reduced losses on programs.
- Diluted earnings per share (EPS) rose to $5.22 for the six months ended June 30, 2017, from $1.51 in the prior year, reflecting the strong earnings growth.
- The Commercial Airplanes (BCA) segment's earnings from operations improved dramatically to $2.78 billion from $60 million, largely due to reduced reach-forward losses on the 747 and KC-46A programs.
- Defense, Space & Security (BDS) segment's earnings from operations increased to $1.63 billion from $1.41 billion, driven by higher earnings in Boeing Military Aircraft and Global Services & Support segments.
- Total contractual backlog remained strong at $467.6 billion as of June 30, 2017, an increase from $458.3 billion at the end of 2016, indicating robust future order book.
- Boeing continued its capital return to shareholders, repurchasing $5.0 billion in shares and paying $1.7 billion in dividends during the first six months of 2017.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2017, Boeing Co kept $0.08.
- Revenue$23.05B100.0%
- Cost of revenue−$18.70B81.1%
- Gross profit$4.35B18.9%
- Operating costs−$1.82B7.9%
- Operating income$2.53B11.0%
- Interest, other & tax−$781.0M3.4%
- Net income$1.75B7.6%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2017filed July 26, 2017Financial Statements
Q2 FY2017 against Q2 FY2016
| Line item | Q2 FY2017Q2 FY2016 | Change |
|---|---|---|
| Revenue | $23.05B$24.75B | −6.9% |
| Cost of Revenue | $18.70B$22.32B | −16.2% |
| Gross Profit | $4.35B$2.43B | +79.0% |
| R&D Expenses | $813.00M$2.13B | −61.8% |
| Operating Income | $2.53B-$419.00M | +703.8% |
| Net Income | $1.75B-$234.00M | +847.4% |
| EPS (Basic) | $2.91$-0.37 | +886.5% |
| EPS (Diluted) | $2.87$-0.37 | +875.7% |
| Shares Outstanding (Basic) | 602.50M636.30M | −5.3% |
| Shares Outstanding (Diluted) | 608.90M635.30M | −4.2% |
05—Questions
Frequently Asked Questions
What drove the significant increase in net earnings and EPS in the first half of 2017 compared to 2016?
The substantial increase in net earnings and EPS was primarily driven by a significant reduction in reach-forward losses recorded on programs such as the 747 and KC-46A Tanker, which negatively impacted prior year results. Additionally, the reclassification of certain 787 flight test aircraft inventory costs to R&D expense in the prior year also contributed to the year-over-year improvement.
Why did total revenues decrease despite the improved earnings?
Total revenues decreased primarily due to a lower number of aircraft deliveries in the Commercial Airplanes segment. While earnings improved due to better cost management and reduced losses on specific programs, the top-line revenue was impacted by the volume of deliveries.
What is the outlook for the Commercial Airplanes (BCA) segment, and what are the key risks?
The BCA segment shows strong recovery with significantly improved earnings, driven by reduced program losses. The segment's backlog remains robust. However, risks include lower-than-expected demand for large commercial aircraft affecting the 747 program, potential production challenges and cost overruns on the 787 program, and the complexity of introducing new aircraft models like the 737 MAX and 777X.
How is the Defense, Space & Security (BDS) segment performing, and what are the key factors affecting it?
The BDS segment demonstrated stable revenue and improved earnings from operations, driven by strong performance in Boeing Military Aircraft and Global Services & Support. Key factors influencing the segment include U.S. government budget uncertainties, potential sequestration cuts, and the inherent complexities and risks associated with fixed-price development contracts, such as the KC-46A Tanker program.
06—Continue