Boeing’s [BA] losses narrowed in the first quarter despite lower sales which were down on fewer commercial aircraft deliveries, but overall solid results in the company’s defense and services segments helped offset some of the commercial woes.
The defense business did suffer somewhat on continued charges on programs with fixed-price development contracts, this time $122 million for the Air Force’s KC-46 aerial refueling tanker and $94 million for the service’s T-7 jet trainer.
The T-7 completed climate lab testing in February and flight testing with the Air Force is going well, and the KC-46, which is in production and being fielded, gives Boeing an opportunity to understand remaining issues and reduce risks, Brian West, the company’s chief financial officer, said during an earnings call.
Sales at Boeing Defense, Space, and Security increased 6 percent to $7 billion and operating earnings swung to a $151 million profit versus a $212 million loss a year ago. Operating margin was 2.2 percent.
West said Boeing is still targeting annual defense margin to be in the high-single digits in the 2025 to 2026 timeframe.
Backlog in the defense segment rose 3 percent to $60.7 billion, 31 percent reflecting international orders, from $59 billion at the end of 2023.
Boeing Global Services posted sales of $5 billion, up 7 percent from a year ago, and operating income of $916 million was up 8 percent on higher commercial volume and higher margin work. Dave Calhoun, Boeing’s president and CEO, said this year the company will complete the integration of its two distribution businesses within the segment, Aviall and KLX, under the Boeing brand, which will help boost margin.
Despite the positives at the defense and services segments, Boeing’s sales fell 8 percent to $16.6 billion from $17.9 billion due to fewer commercial aircraft deliveries. Net losses narrowed to $355 million, 56 cents earnings per share (EPS), from $425 million ($1.27 EPS) a year ago. Excluding pension adjustments, the core earnings loss of $1.13 EPS was far better than the $1.63 EPS loss expected by analysts.
The Commercial Airplanes segment delivered $4.7 billion in revenue, down 31 percent from a year ago on a 36 percent decline in aircraft deliveries as the company works through safety and quality issues. The operating loss widened to $1.1 billion from $615 million a year ago.
Free cash was a negative $3.9 billion in the quarter and the company still expects to get to $10 billion of annual free cash flow but “later in the 2025 to 2026 window,” which will take longer than planned due to managing the safety and quality issues on the 737 and 787 passenger aircraft, West said.
Boeing’s overall backlog at the end of the quarter was $528.7 billion, up 2 percent from $520.2 billion at the end of 2023.