Boeing Posts $160-Million Loss
Steep costs to settle a government investigation and pay for delays to an airborne surveillance system sent Boeing Co. to its first quarterly loss in three years, the company reported Wednesday.
Boeing strengthened the outlook for its resurgent commercial airplane business at the same time it announced the $160-million second-quarter deficit. But it also reduced its 2006 earnings forecast, and its stock fell.
Although the $1.07 billion in charges were expected, Wall Street showed disappointment that the aerospace company chose not to write off any of its Justice Department settlement and increased its 2007 outlook less than many had anticipated.
Revenue increased 2% to $15 billion from $14.7 billion.
Boeing shares closed down $3.85, or 4.6%, at $79.90 in the wake of the report. The stock has traded in a 52-week range of $62.01 to $89.58.
The loss was Boeing’s first since the second quarter of 2003 and came in a year in which its commercial aircraft business has outperformed rival Airbus.
Chairman and Chief Executive James McNerney said the commercial airplane business remained the company’s growth catalyst, thanks to an expanding market and strong sales of Boeing planes. He said the charges “overshadowed solid fundamentals” during the quarter.
The net loss for the April-June period amounted to 21 cents a share and compared with profit a year earlier of $566 million, or 70 cents. It was a penny better than the consensus estimate of analysts surveyed by Thomson Financial but fell short of several forecasts that anticipated Boeing would deduct at least some of the settlement charge.
By not seeking a tax write-off, Boeing avoided further controversy in Washington.
“Without question, the short-term financial impact of the taxability issue is significant,” McNerney said. “However, the long-term value of Boeing’s reputation is even more significant.”
The charges included $571 million, after reserves, for the $615-million settlement with the Justice Department relating to the hiring of former Air Force official Darleen Druyun and the alleged use of secret documents obtained from rival Lockheed Martin Corp. to win contracts. A separate charge for $496 million was to cover delays of as long as 18 months in an international airborne surveillance system for Australia and Turkey.
The Seattle-based commercial airplane division saw a 10% jump in revenue that helped its operating earnings rise 51% to $719 million. It generated $7.1 billion in sales, or 47% of the company’s total.
Boeing delivered 97 commercial planes, its highest second-quarter total since 2002, and out-booked Airbus in aircraft orders in the first half by 496 to 117. The company also said it had 364 firm orders for the 787, which it intends to test-fly in 2007.
Growth at the airplane unit, along with higher productivity, prompted Boeing to increase its 2007 earnings-per-share guidance by 15 cents to a range of $4.25 to $4.45 and its 2007 revenue guidance by $1 billion to between $64.5 billion and $65.5 billion. Analysts already were anticipating $4.49 a share on revenue of $65.4 billion.
Because of the charges, Boeing reduced its outlook for 2006 earnings per share to a range of $2.40 to $2.55, down from $3.25 to $3.45.
