10-QPeriod: Q2 FY2018

BOEING CO Quarterly Report for Q2 Ended Jun 30, 2018

Filed July 25, 2018For Securities:BABA-PA

Summary

Boeing's second quarter 2018 report shows robust revenue growth across its segments, particularly in Commercial Airplanes (BCA) and Defense, Space & Security (BDS), driven by increased deliveries and contract wins. Total revenues increased by approximately 5.8% year-over-year for the quarter, reaching $24.3 billion, and 5.8% for the first six months to $47.6 billion. Earnings from operations also saw a significant improvement, up 7.7% for the quarter to $2.7 billion, and 18% for the first six months to $5.6 billion, largely due to better cost performance in BCA and increased defense contracts. The company has successfully adopted new accounting standards, notably Topic 606 (Revenue from Contracts with Customers), which has accelerated revenue recognition for certain long-term contracts. While this adoption has had a material impact on prior period reporting, the current period results reflect its implementation. Boeing also announced a significant strategic partnership with Embraer to form a joint venture for their commercial aircraft businesses, positioning the company for future growth in a competitive market. Shareholder returns remain a focus, with substantial share repurchases and dividend payments continuing.

Financial Highlights

53 data points
Beta

Revenue

$24.26B

19.5% Gross Margin

Net Income

$2.20B

9.1% Net Margin

EPS (Diluted)

$3.73

Total Assets

$113.19B

Cash & Equivalents

$8.12B

Free Cash Flow

$4.30B

Financial Statements
Beta
Revenue$24.26B
Cost of Revenue$19.54B
Gross Profit$4.72B
R&D Expenses$827.00M
Operating Income$2.71B
Net Income$2.20B
EPS (Basic)$3.77
EPS (Diluted)$3.73
Shares Outstanding (Basic)582.60M
Shares Outstanding (Diluted)588.00M

Key Highlights

  • 1Total revenues increased by 5.8% to $24.3 billion for the three months ended June 30, 2018, and by 5.8% to $47.6 billion for the six months ended June 30, 2018, compared to the prior year periods.
  • 2Earnings from operations increased by 7.7% to $2.7 billion for the three months ended June 30, 2018, and by 18% to $5.6 billion for the six months ended June 30, 2018, indicating improved profitability.
  • 3Commercial Airplanes (BCA) segment saw a revenue increase of 1.4% to $14.5 billion for the quarter, driven by higher deliveries and favorable mix, with earnings from operations up significantly by 28.3%.
  • 4Defense, Space & Security (BDS) revenues grew by 8.7% to $5.6 billion for the quarter, with earnings from operations decreasing slightly by 0.5% due to higher KC-46A Tanker charges.
  • 5Global Services (BGS) demonstrated strong revenue growth of 15.1% to $4.1 billion for the quarter, contributing to overall company performance.
  • 6Boeing announced a significant strategic partnership with Embraer to create a joint venture for their commercial aircraft businesses, valued at $4.75 billion, signaling future growth initiatives.
  • 7The company repurchased approximately $6.0 billion of its common stock during the first six months of 2018, alongside paying dividends, reflecting a commitment to returning capital to shareholders.

Frequently Asked Questions

Boeing's total revenues for the three months ended June 30, 2018, increased by approximately 5.8% to $24.3 billion, compared to $23.1 billion in the same period of 2017. This growth was primarily driven by increases in the Commercial Airplanes, Defense, Space & Security, and Global Services segments.

Earnings from operations saw a significant increase, rising by 7.7% to $2.7 billion for the quarter. This improvement was largely attributed to higher earnings in the Commercial Airplanes (BCA) segment, benefiting from improved cost performance, higher deliveries, favorable mix, and lower R&D spending. Partially offsetting these gains were higher charges related to the KC-46A Tanker program.

The announcement of a strategic partnership with Embraer to form a joint venture for their commercial aircraft and services businesses is a significant development. This transaction values Embraer's commercial operations at $4.75 billion and would make Boeing an 80% owner of the joint venture. It signifies Boeing's strategy to consolidate and grow its position in the commercial aircraft market, particularly in response to competitive pressures.

Boeing adopted new accounting standards, notably ASU 2014-09 (Revenue from Contracts with Customers), using a full retrospective method. This led to adjustments in prior period financial statements. For long-term contracts, particularly in defense and services, the new standard generally accelerates revenue recognition to 'over time' as costs are incurred, rather than at delivery or milestone completion. While this has restated prior periods, it did not materially impact the current period's financial position or results of operations for the period ending June 30, 2018, beyond the initial adjustments.