By Calvin Biesecker
Boeing [BA] yesterday posted higher net income in the first quarter due to sharply lower tax expenses and sales fell slightly on a drop in revenues from its Commercial Airplanes segment.
Net income increased 13 percent to $586 million, 78 cents earnings per share (EPS), from $519 million (70 cents EPS). Earnings beat analysts’ expectations by seven cents EPS.
Last year’s results included a $150 million (20 cents EPS) charge related to new federal healthcare law. Excluding the lower taxes in the first quarter of 2011, operating earnings declined 15 percent to $1 billion due to fewer aircraft deliveries and higher research and development (R&D) costs at Commercial Airplanes and higher pension expenses.
Free cash was a $1.4 billion outflow, which the company attributed to the timing of deliveries and R&D spending.
Sales in the quarter dipped 2 percent to $14.9 billion from $15.3 billion on a decline at Commercial Airplanes while revenues at the Defense, Space and Security segment remained level.
Boeing’s defense business eked out a 1 percent increase in operating profits to $671 million, with a hefty gain at its Military Aircraft operations more than offsetting double- digit declines in the Network & Space Systems and Global Services & Support operations. The company attributed the profit improvement at Military Aircraft to improved performance and mix in global strike programs and lower R&D expenses.
Sales in the defense segment were $7.6 billion. Contracted backlog increased $1.4 billion to $49.8 billion since the end of 2010.
At Commercial Airplanes, operating earnings tumbled 25 percent to $509 million on a 5 percent decline in sales to $7.1 billion combined with the higher R&D expenses. The R&D costs are mainly related to the 787 and 747-8 commercial aircraft programs, which are now 90 percent and 75 percent through their respective flight test programs.
All major development risks with the 787 program have been retired and first aircraft delivery remains on track for the third quarter of 2011 with between 12 and 20 planes expected to be delivered this year, Jim McNerney, chairman, president and CEO of Boeing, said on yesterday’s earnings call.
A significant part of Boeing’s growth in the coming years is tied to planned increases in commercial aircraft production, McNerney said. Several programs, including the 737, 787 and 747-8, will drive the planned 40-plus percent increase in commercial aircraft output during the next three years, representing a “significant and substantial growth opportunity,” he said.
Sales were down in Commercial Airplanes on four fewer aircraft deliveries and the mix of aircraft that favored lower prices models. Contracted backlog in the segment increased by $5.3 billion to $260.9 billion during the quarter.
Boeing left its guidance for 2011 unchanged, with sales expected to be between $68 billion and $71 billion and earnings between $3.80 and $4 EPS.