Could Boeing Have Communicated More to Investors About Earnings?

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Boeing Co. (NYSE: BA) reported fourth-quarter and full-year 2015 results before markets opened Wednesday. For the quarter, the aerospace company posted adjusted diluted earnings per share (EPS) of $1.60 on revenues of $23.57 billion. In the same period a year ago, the company reported EPS of $2.31 on revenues of $24.47 billion. Fourth-quarter results also compare to the Thomson Reuters consensus estimates for EPS of $1.27 and $23.55 billion in revenues.

For the full year, Boeing posted EPS of $7.72 on revenues of $96.11 billion, compared with 2014 EPS of $8.60 and revenues of $90.76 billion. Analysts had estimated EPS at $7.40 and revenues of $96.09 billion.

Boeing delivered 182 new commercial jets in the fourth quarter, down 7% year over year. Revenues were down 4% and earnings were down 64%. Operating margin for the quarter fell by 5.8 percentage points to 3.5%.

For the full year, revenues rose 10%, but operating income fell 20%, and operating margin was down 2.9 percentage points to 7.8%. Full-year deliveries of 762 commercial jets was a record.

One inference we can draw from all that is that Boeing was discounting their commercial planes more heavily than usual. To some degree we can see that in the company’s operating cash flow of $9.42 billion for the year before pension contributions, down about 2.3% compared with 2014.

Boeing announced last week that the company would take a pretax charge of $885 million ($0.84 per share) in the fourth quarter related to the 747 program and a further production rate cut from one plane per month to one-half plane per month. The drop to one plane a month is set to begin in March, and the cut to one-half per month takes effect in September.

What Boeing did not announce last week, but waited to release Wednesday, is a weak forecast for 2016. Deliveries are forecast in a range of 740 to 745, down from 762 deliveries in 2015. The decline is not all due to the 747 production change, and the company is not going to deliver fewer 737s or 787s. The decrease is almost certainly due to lower production of the 777.