Boeing Reports Strong Third-Quarter Results and Raises 2013 EPS Guidance

23-Oct-2013

Core EPS (non-GAAP)* rose 16 percent to $1.80 on strong operating performance; GAAP EPS of $1.51
Revenue increased 11 percent to $22.1 billion reflecting higher commercial deliveries
Backlog grew to a record $415 billion, including $27 billion of net orders during the quarter
Operating cash flow before pension contributions* increased to $4.3 billion
2013 Core EPS guidance increased to between $6.50 and $6.65; GAAP EPS to between $5.40 and $5.55

The Boeing Company (NYSE: BA) reported third-quarter core earnings per share (non-GAAP) increased 16 percent* to $1.80, driven by strong performance across the company's businesses (Table 1). Third-quarter core operating earnings (non-GAAP) increased 20 percent* to $2.1 billion from the same period of the prior year. Third-quarter revenue was $22.1 billion, GAAP earnings from operations was $1.8 billion and earnings per share was $1.51. Core earnings per share guidance increased to between $6.50 and $6.65 and

GAAP earnings per share guidance increased to between $5.40 and $5.55, reflecting the strong performance. The company also increased its 2013 operating cash flow outlook to greater than $7 billion, which includes $1.5 billion of discretionary pension contributions, and reaffirmed its 2013 revenue guidance.

"Consistently strong operating performance is driving higher earnings, revenue and cash flow as we deliver on our record backlog and return increased value to shareholders," said Boeing Chairman, President and CEO Jim McNerney. "During the quarter, Commercial Airplanes completed the first flight of the 787-9 and delivered 170 airplanes, while Defense, Space & Security maintained solid performance and captured $7 billion in new orders. Despite the uncertainty of the U.S. defense market, overall our customer-focused business strategies and disciplined execution on our programs are producing the results we expect, and our strong year-to-date performance and positive outlook allow us to increase our 2013 guidance for earnings and operating cash flow."

Operating cash flow before pension contributions* in the quarter was $4.3 billion, reflecting higher commercial airplane production rates, strong core operating performance and timing of receipts and expenditures (Table 2). During the quarter, the company repurchased 7.6 million shares for $0.8 billion and paid $0.4 billion in dividends, reflecting an 11 percent increase in dividends paid compared to the same period of the prior year.

Cash and investments in marketable securities totaled $15.9 billion at quarter-end (Table 3), up from $14.3 billion at the beginning of the quarter. Debt was $9.6 billion, unchanged from the beginning of the quarter.

Total company backlog at quarter-end was a record $415 billion, up from $410 billion at the beginning of the quarter, and included net orders for the quarter of $27 billion.

Segment Results

Commercial Airplanes

Boeing Commercial Airplanes third-quarter revenue increased to $14.0 billion and operating margin improved to 11.6 percent on higher delivery volume and continued strong operating performance (Table 4).

During the quarter, the 787-9 completed first flight. With the successful launch of the 787-10 and continued strong demand for the 787 family of airplanes, the company intends to increase the 787 production rate from 10 to 12 per month in 2016, with plans to increase to 14 per month before the end of the decade.

Commercial Airplanes booked 200 net orders during the quarter. Backlog remains strong with nearly 4,800 airplanes valued at a record $345 billion.

Boeing Defense, Space & Security

Boeing Defense, Space & Security's third-quarter revenue was $8.0 billion, while operating margin was 8.4 percent (Table 5).

Boeing Military Aircraft (BMA) third-quarter revenue was $3.5 billion, primarily reflecting lower delivery volume. Operating margin decreased to 6.2 percent, impacted by mix and one-time charges on the F-15 and C-17 programs. During the quarter, BMA was awarded a low-rate initial production award for 13 P-8A Poseidon aircraft.

Network & Space Systems (N&SS) third-quarter revenue was $2.2 billion, reflecting higher sales of Delta inventory and revenue in the Space Launch System program, and operating margin was 8.7 percent. During the quarter, N&SS was awarded a contract by Mexico's Satmex for an additional 702 small satellite.

Global Services & Support (GS&S) third-quarter revenue was $2.3 billion, due to higher volume in maintenance, modifications & upgrades. Operating margin was 11.4 percent, reflecting strong performance. During the quarter, GS&S achieved first flight on the QF-16 unmanned aircraft and was also awarded a contract by the U.S. Air Force for 56 additional replacement wings for the A-10 aircraft.

Backlog at Defense, Space & Security was $70 billion, of which 38 percent represents orders with international customers.

Additional Financial Information

At quarter-end, Boeing Capital Corporation's (BCC) net portfolio balance was $4.1 billion and debt-to-equity ratio was 5.0-to-1. Other segment earnings improved $118 million in the quarter primarily due to an insurance recovery. Unallocated items and eliminations included in core operating earnings increased in the third quarter of 2013 partly due to higher deferred compensation expense as a result of stock price appreciation. Total pension expense for the third quarter was $775 million, up from $583 million in the same period last year. Unallocated pension expense included a charge related to the previously announced decision to end C-17 production in 2015 offset by a one-time prior period pension adjustment.

Outlook

The company's 2013 financial guidance (Table 7) has been updated to reflect continued strong performance in both businesses, generating an expected 12 percent year over year increase in core earnings per share (non-GAAP).

Refer to full documentation in attachments box, located at the top left, below the headline.