Boeing Beats the Street With Record Revenue and Fat Margins

Boeing

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Shares of Boeing (NYSE:BA) fell as much as 3.8 percent in early trading on Wednesday after the aerospace manufacturer released fourth-quarter and full-year results. The company beat analyst expectations on both the top and bottom line but issued 2014 guidance below current analyst forecasts.

Fourth-quarter revenues increased 7 percent on the year to $23.79 billion, ahead of the mean analyst estimate of $22.73 billion. Growth was led by a 9 percent increase in Defense, Space & Security revenues to $8.86 billion, which accounts for 37.1 percent of total revenues. Commercial Airplane deliveries increased 4 percent to 172, leading to a 4 percent increase in segment revenues to $14.68 billion, which accounts for 61.9 percent of revenues.

Full-year revenues increased 6 percent to $86.62 billion, ahead of the mean analyst estimate of $85.01 billion. For the year, revenue growth was driven by Boeing’s Commercial Airplane segment, in which deliveries grew 8 percent to 648 and revenues grew 8 percent to $52.98 billion, accounting for 61.2 percent of total revenues. MDS revenue contracted 1 percent for the year to $15.94 billion, accounting for 18.4 percent of total revenue.

“Our Commercial Airplanes business accelerated delivery of its record backlog by successfully increasing production rates while also achieving important development milestones on the 737 MAX and 787-9 and launching the new 787-10 and 777X models with an unprecedented customer response,” said Chairman and CEO Jim McNerney in the earnings release.

Boeing won 465 net orders in the fourth quarter and 1,355 for the year, with cumulative orders for the 737 MAX hitting 1,783 by year’s end. The 777X claimed 259 orders or order commitments, and to top it all off, the production rate of the 787 hit 10 per month.

Boeing posted core (non-GAAP) earnings of $1.84 billion in the fourth quarter, flat on the year, on a margin of 7.2 percent, down 0.5 percentage points. Core earnings per share increased 29 percent to $1.88, beating the mean analyst estimate of $1.59 per share. Operating cash flow before pension obligations fell 66 percent to $1.4 billion.

On a GAAP basis, earnings from operations fell 7 percent on the year in the fourth quarter to $1.52 billion on an operating margin of 6.4 percent, down 0.9 percentage points. Net earnings increased 26 percent on the year to $1.2 billion, and earnings per share increased by 26 percent to $1.61. Operating cash flow declined 67 percent to $1.38 billion.

For the year, core operating earnings increased 10 percent to $7.88 billion on a 9.1 percent margin, up 0.3 percentage points. Core earnings per share increased 20 percent to $7.07, and operating cash flow before pension contributions increased 7 percent to $9.72 billion.

Looking ahead, Boeing provided 2014 core EPS guidance in a range between $7 and $7.20, below the current mean analyst estimate of $7.28. The company guided revenue in a range between $87.5 billion and $90.5 billion, also below the current mean analyst estimate of $92.98 billion. This discrepancy appears to be the major reason for the selling pressure on Wednesday.

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