What to expect from Boeing's earnings as 737 Max crisis continues
- Boeing reports earnings before the markets open on Wednesday.
- Investors are eager to hear from the company's new CEO on how the company is handling the 737 Max crisis.
- Boeing is expected to post adjusted per-share earnings of $1.47, down 73% on the year.
Boeing is still embroiled in the crisis stemming from two crashes of its 737 Max planes. The company is set to detail the financial damage in its quarterly earnings report before the market opens on Wednesday.
The report puts Boeing's new CEO Dave Calhoun in the hot seat with investors on his first earnings call at 10:30 a.m. ET. Calhoun, a decadelong Boeing board member and former General Electric and Blackstone Group executive, took the helm earlier this month after previous chief Dennis Muilenburg was ousted for his handling of the Max crisis late last year.
Here are some things to look for in the report:
Earnings, revenue tumble
Boeing's best-selling plane, the 737 Max, has been grounded since March, and the company reported negative overall orders in 2019, its worst performance in decades and one that drove down the manufacturer's revenue and earnings. Boeing will likely post per-share, adjusted earnings of $1.47 in the fourth quarter, according to average estimates by analysts polled by Refinitv. Wall Street analysts expect revenue to drop by 23.5% to $21.67 billion.
Costs climbing
Boeing's executive team will update the Street on the rising costs of the Max grounding. The company took a $5.6 billion pretax charge in July to compensate airlines and other customers for the flight ban. Analysts expect the company to take another charge as airlines are set to go another peak summer travel season without the planes. Some analysts expect the cost of the grounding to climb to or above $20 billion.
Boeing recently did an about-face on whether airline pilots will have to undergo simulator training, a process that promises to add to the company's costs and add to delays to when the planes can fly again.
The company this week secured commitments of more than $12 billion for a two-year loan from more than a dozen banks as Boeing seeks to increase its liquidity.
GE, Spirit and supplier woes
Boeing this month suspended production of the 737 Max, its best-selling aircraft. Regulators haven't said exactly when they will recertify the planes as safe for the flying public but the FAA's administrator Steve Dickson last week told some airline executives it could happen before the middle of the year, slightly ahead of Boeing's forecast.
Boeing says it does not plan to lay off or furlough any of its employees, but it has reassigned some of its 737 Max employees from its Renton, Wash. factory to other facilities, including in California.
Calhoun and Boeing's executive team is expected to outline how the grounding will affect suppliers. Fuselage-maker Spirit Aerosystems earlier this month said it would cut an initial 2,800 jobs. General Electric, which makes engines for the 737 Max in a joint venture with French aerospace giant Safran, recently laid off about 70 temporary workers at a facility in Quebec. Suppliers have been told by the manufacturers, which also make engines for rival Airbus's planes, that they plan to reduce the number of engines they produce this year, according to people familiar with the matter. General Electric is scheduled to report earnings before Boeing on Wednesday.
Rebuilding relationship with regulators
Boeing's leaders are also likely to provide detail on how it's trying to rebuild its relationship with regulators after batch after batch of embarrassing internal emails showed Boeing employees boasting about convincing regulators to accept less stringent training.
In others, employees expressed safety concerns about the planes. Regulators pushed back on repeated comments from former CEO Muilenburg that the plane would be approved to fly by the end of 2019, comments that contributed to the loss of his job.
The dividend stays in the picture
Boeing's new CEO last week said the company intends to maintain its dividend, despite the crisis, but investors will want to know of any scenarios that could change that.
"They are going to do everything they can not to mess with the dividend," said Robert Springarn, Boeing analyst at Credit Suisse. The dividend is one of the strongest ways a company can express long-term confidence in itself and that in this case, the difficult situation is temporary.
Other aircraft
Watch for Boeing executives to provide more details on demand for its more-expensive widebody aircraft, sales of which have slowed. Those planes have grown in importance as the 737 Max remains grounded. Boeing has already announced plans to trim production of its 787 Dreamliners to 12 a month from 14, but further cuts are possible. Investors will also want a timeline of testing of the 777X, the largest twin-engine jet, which first took off this year.
Rival Airbus has been selling hundreds of its long-range single aisle plane and Boeing executives may face questions about Boeing's plans for an all-new jet.
Correction: Spirit AeroSystems announced initial layoffs of 2,800 jobs. An earlier version misstated the figure.