The Boeing Company (NYSE:BA) reported its earnings for the second quarter, which proved to be higher than their expectations. Investors have become excited over the possible production of new aircrafts for the military. CEO Jim McNerney told the analysts on Wednesday that the crash of Flight 17 of Malaysia Airlines was truly unfortunate and that his company was providing technical support for the international investigation of the crash. He said that in the history of aviation, this was probably the most unsettling event- the crashing of flight 17.
The net income of The Boeing Company (NYSE:BA) was 52% higher than last year’s at $1.7 billion. The company gained a profit of $2.42 for each share. This exceeded the estimate given by the Wall Street – $2.01 – and was 45% higher than last year. However, the revenue generated was lower than expected. The revenue increased by only one percent and reached $22 billion, while the expected volume of revenue was $22.3 billion. The company has also tied higher expectations with its full-year profit. It now expects EPS in the range of $7.90 and $8.10 as compared to the previous $7.15 to $7.35. In the current quarter, the company managed to buy back its stocks that are worth $1.5 billion.
The earnings were reduced because of the additional development charges of KC 46A Tanker – a refueling aircraft for the military which is based on Boeing 767. The charges were about $272 million which include the manufacturing and engineering costs that occurred because of wiring problems. The CEO also said that even though The Boeing Company (NYSE:BA) fully understand and comprehend the problems yet they are disappointed in the additional charges that these problems incurred. The potential of the 46 A tankers for o long-term is about 400 aircrafts, totaling $80 billion according to McNerney.
The investors however were scared by the production charges of the tankers. The Boeing Company (NYSE:BA) closed the last trading session at $3.03, earning $126.71. Robert Stallard of RBC Capital Markets said that they are worried about the tremendous charges that this long term plan has already incurred.
The Boeing Company (NYSE:BA) has also been widely criticized for production and engineering issues in the past, particularly, with the 787 Dreamliner. A high-profit plane, that was finally brought to the customers three years after the expected release date. Analysts have also pointed out that certain favorable items, such as resolution of the earlier disputes over taxes, can potentially mislead the investors into a false sense of profitability. Such items are the reason why the company has earned far more than expected. The value of the tax items was about $0.5 billion.
Christian Mayes, an analyst for Edward Jones Equity Research, said that the numbers in the earnings report look quite good for The Boeing Company (NYSE:BA) but these numbers have been incurred as a result of tax benefits. Such benefits will only effect once, not every time. So the investors must be careful not to tie high expectations with the company in future.
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