Boeing on Wednesday reported its first quarterly revenue drop in seven quarters, but the U.S. planemaker beat Wall Street expectations that were lowered after a January mid-air blowout of a cabin door prompted it to slow production of its strongest-selling jets.
After the report, Boeing's Chief Executive Dave Calhoun told
CNBC that a deal to acquire its key supplier Spirit AeroSystems is more than
likely during the second quarter. The two have confirmed tie-up talks, although
pricing remains a challenge in the complex deal.
Boeing said first-quarter cash burn, a metric closely
watched by investors, was $3.93 billion, better than average analyst
expectations of a cash burn of $4.49 billion.
In March, Boeing indicated it would use between $4 billion
and $4.5 billion due to a crisis following the Jan. 5 accident involving a
nearly new 737 MAX 9 jet.
Boeing's shares, which have sunk 35% year to date, were up
1% in early trading after its loss per share was narrower than expected. Spirit
Aero's shares rose 1%.
"Well it could have been worse. While the loss and the
cash outflow are not as bad as feared, the company is still clearly facing some
serious challenges in the Commercial Aircraft division that will take some
fixing," Vertical Research Partners analyst Robert Stallard said in a
note.
Since the Jan. 5 accident on an Alaska Airlines-operated
jet, the U.S. Federal Aviation Administration (FAA) has imposed a cap on
production of Boeing's strong-selling 737 MAX jets. The FAA also has told
Boeing to develop a comprehensive plan to address "systemic
quality-control issues."
Before the report, Calhoun, who will step down around year
end, said in a letter to employees on that Boeing was "in a tough
moment", slowing the system to improve quality and safety.
"Lower deliveries can be difficult for our customers
and for our financials. But safety and quality must and will come above all
else," he added.
Quarterly revenue was $16.57 billion, down from $17.92
billion a year earlier but beating expectations of $16.23 billion.
While Boeing has not named a successor, Calhoun told CNBC he
believes commercial airplanes boss Stephanie Pope has potential to run the
company.
Reuters reported this month that output of Boeing's cash-cow
737 MAX had fallen sharply as U.S. regulators stepped up factory checks.
Analysts have warned the slow pace of deliveries could delay
Boeing's financial and production goals. Boeing's CFO said last month the
company needs more time to hit a goal outlined in 2022 for an annual cash flow
of about $10 billion by 2025 or 2026.
That goal is seen as key as Boeing works to accelerate its
recovery from an earlier crisis after two MAX jets crashed in 2018 and 2019.
The company also expects a slower increase in the production
rate and deliveries of its 787 widebody jets due to supplier shortages "on
a few key parts," a memo showed on Monday.
Yet with production constrained at Boeing and its rival
Airbus, demand remains strong, though the European planemaker increased its
lead in the narrowbody market in the first quarter.
Calhoun said Boeing would have "largely delivered"
its inventory of 737s and 787s by the end of the year, bringing in much-needed
cash. He added that its defense business, which has been losing money in recent
quarters, "will be progressing toward more historical levels of
performance."
Operating margins at Boeing's defense business rebounded to
2.2% in the quarter from a negative 3.2% a year ago, though it still lost $222
million on certain fixed-price development programs.
Boeing delivered 67 737s in the quarter through March, down
41% from last year. Planemakers receive the bulk of the cash upon delivery of
the aircraft.
Combined with compensation Boeing had to pay airlines for
the temporary grounding of MAX 9 aircraft, margins at its commercial airplanes
business deteriorated to negative 24.6% from negative 9.2%.
Overall adjusted loss per share narrowed to $1.13, beating
expectations of loss per share of $1.76, as per LSEG data.
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