Investors in Boeing (NYSE: BA) received mixed news when the company released earnings data on Wednesday. The world’s largest aircraft manufacturer has returned to profitability, but the figures are massively down when compared to the year ago period.
Ongoing 737 MAX groundings and trade war headwinds are the biggest challenges that the company faces today.
Here’s what investors need to know.
Earnings Shrink Year Over Year
Boeing generated $19.98 billion in revenue during the third quarter and took $895 million in earnings at the bottom line. This was a significant decrease from the $1.9 billion the company reported a year ago.
Earnings per share ended up at $1.45 on Wednesday, down from the $2.12 that analysts expected.
The profit came mostly from Boeing’s defense contracts and space projects. Commercial aerospace is running at a loss, due to ongoing groundings. Boeing’s 737 MAX jets have been out of service worldwide since March, after two crashes that caused 346 deaths.
Groundings May Continue Throughout 2019
Boeing was previously optimistic that the 737 MAX would be re-approved by the FAA and international safety regulators by October. This hasn’t been the case, although Boeing has said that it is now in the final stages of submitting documentation for certification.
CEO Dennis Muilenburg said in a statement that “Our top priority remains the safe return to service of the 737 MAX, and we’re making steady progress. We’ve also taken action to further sharpen our company’s focus on product and services safety.”
Even if U.S. regulators approve the jets for service by the end of December, it could take until January or later before international counterparts follow suit.
Boeing is still manufacturing 737 MAX jets, despite not being able to release them to operators. The company has said that it will raise production from 42 per month to 57 per month by the end of 2020. There are currently over 5000 orders on the books, so there’s a long-term revenue upside to look forward to.
Trade War Has Impacted Demand
The problems for Boeing go beyond groundings. The U.S. – China trade war has impacted demand for the 787 Dreamliner, with Boeing saying that production will be cut to around 12 per month in 2020.
Investors should take all this news into account when making decisions on Boeing stock.
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