Boeing [BA] in 2018 eclipsed the $100 billion revenue mark for the first time on strength across its operating segments and the company delivered a solid fourth quarter due to higher commercial aircraft deliveries, and increased volume in defense and services.
Fourth quarter sales were also a record, up 14 percent to $28.3 billion from $24.8 billion a year ago, with all three operating segments enjoying double-digit percentage gains, Boeing reported on Wednesday. Commercial aircraft deliveries drove the increase, followed by the Global Services segment, which benefited from higher parts sales and the recent acquisition of KLX, while F/A-18 fighter aircraft, satellites and weapons sales powered the defense segment.
Net income in the quarter increased 3 percent to $3.4 billion, $5.93 earnings per share (EPS), from $3.3 billion ($5.49 EPS) a year ago. Core operating earnings, which exclude pension adjustments, were $5.48 EPS, well above consensus estimates of $4.57 EPS.
The Defense, Space & Security segment boosted sales in the quarter by 16 percent to $6.1 billion and operating income jumped 23 percent to $669 million on the sales and a favorable mix of higher margin business. Operating margin in the defense business increased 60 basis points to 10.9 percent.
Backlog in the defense business at the end of 2018 stood at $57 billion, 30 percent of it with international customers, up from $44 billion a year ago due to significant contract wins by the company. Overall backlog stood at $490.5 billion at the end of 2018, up from $474.6 billion a year ago, mainly due the increase in the defense segment, which booked $36 billion in orders.
Last week, Boeing delivered to the Air Force the first two KC-46A aerial refueling tankers of a planned buy of 179 aircraft. Dennis Muilenburg, Boeing’s chairman, president and CEO, said on the company’s earnings call that the Air Force has accepted two more tankers, which will be delivered “imminently.”
Overall for 2018, Boeing posted an 8 percent increase in sales to $101.1 billion versus $94 billion in 2017 on record strong revenue growth in the defense and services segments and record commercial aircraft deliveries. The defense segment increased sales by 13 percent to $23.2 billion.
Net income for the year increased 24 percent to $10.5 billion ($17.85 EPS) while core earnings were $16.01 EPS. Core operating margin was up a percent to 10.5 percent. Operating earnings in the defense business slid 27 percent to $1.6 billion on several charges last year on a number of programs, including the KC-46, as operating margin fell nearly 4 percent to 6.9 percent.
The outlook for 2019 shows continued growth for all segments, with overall sales pegged at between $109.5 billion and $111.5 billion. Net income is expected to be between $21.90 and $22.10 EPS and core earnings between $19.90 and $20.10 EPS.
Free cash flow is forecast to be between $14.7 billion and $15.2 billion, with commercial aircraft and an improving cash profile on the KC-46 leading the way. In 2018, Boeing generated $13.6 billion in free cash flow.
Longer term, Muilenburg said that the business environment across the company’s three segments remains positive.