Boeing mulls layoffs as 2Q earnings dip

By Julie Johnsson
Posted July 28, 2010 at 11:36 a.m.

Boeing Co. is feeling the squeeze as the Obama Administration pares military spending and the Chicago-based defense contractor is mulling layoffs and other measures to reduce its costs, Boeing CEO Jim McNerney told analysts Wednesday.

Boeing’s second quarter net income and revenues dipped as the aerospace manufacturer delivered fewer airplanes and encountered defense-spending constraints.

Chicago-based Boeing reported a net income of $787 million, down 21 percent from the year ago period, on revenues of $15.6 billion, which declined 9 percent. Although Boeing’s earnings per share of $1.06 were down 25 percent from the prior-year period, they still topped the $1.02 that analysts had estimated.

Investors, however, were troubled by the unexpectedly poor results at Boeing’s defense business, whose operating earnings dropped 19 percent to $711 million. Boeing shares were down 1.5 percent to $67.57 in Wednesday morning trading.

Boeing was disappointed by the 8.9 percent operating margin reported by the defense and space business for the quarter and plans to ratchet down costs in an effort to gain the 10 percent margin it expects of the business, McNerney said during the company’s earnings call.

“Defense results were lower than we expected across the board,” wrote Joseph Nadol of J.P. Morgan in an investment note. “(G)iven budget and pricing pressure, it’s hard to have much confidence that things will get much better.”

Boeing didn’t absorb any additional financial hits from its 787 Dreamliner and 747-8 jumbo jets, to Wall Street’s relief, although the planemaker is bolstering financial reserves to guard against that risk over the rest of the year.

Boeing also affirmed that the first aircraft from those problem-plagued programs remain on track to be delivered late this year, although those deliveries may slip a few weeks into early 2011.

Boeing continues to predict a steady performance throughout the rest of 2010 and a rebound in 2011, when it stands to see a boost to cash from both the start of steady 787 and 747-8 deliveries and aircraft production-rate increases.

Boeing still expects 2010 revenues to range from guidance $64 billion to $66 billion and to earn $3.50 to $3.80 per share. That guidance includes a buffer in case Boeing has to absorb last-minute costs to fix technical or workmanship flaws discovered as the 787 or new, stretched version of 747 are certified for flight.

The manufacturer said it doesn’t expect to generate any operating cash flow for the year as it devotes cash to fixing kinks in its 787 supply chain and to a growing inventory as the cutting-edge plane completes flight-testing.

The company continues to expect that 2011 revenue will be higher than 2010, and that its operating cash flow will top $5 billion.

Read more about the topics in this post: ,

Companies in this article


Read more about this company »

Comments are closed.