Boeing (BA) reported Q1 results this morning which was its first quarterly earnings report since the 737 MAX issues came to light. The highlight of the report was that Boeing is suspending its full year guidance until it gets the 737 MAX problems sorted out. In terms of the numbers, core (non-GAAP) EPS fell 13% yr/yr to $3.16, which was slightly below market expectations. Revenue fell 2.0% yr/yr to $22.92 bln, which was just slightly below expectations, but generally in-line.
Boeing previously guided to 2019 core EPS of $19.90-20.10 and revenue of $109.5-111.5 bln. In the press release, the company said that "this guidance is no longer valid because it does not reflect the 737 MAX impacts and Boeing does not know when the aircraft will be re-certified. New guidance will be issued at a future date."
In addition to not providing EPS and revenue guidance, it also sounds like BA has suspended its full year commercial plane delivery guidance. This is a key metric for investors. Its 2019 prior guidance was 895-905, but the 737 MAX problems likely put this metric in doubt as well.
So, what all investors want to know is: when will the 737 MAX planes get flying again? Boeing did not give a specific timeframe but said it is "making steady progress on the path to final certification for a software update for the 737 MAX" and that "over 135 test and production flights of the software update are complete." Boeing also said it continues to "work closely with global regulators and airline partners to comprehensively test the software and finalize a robust package of training and educational resources."
The 737 MAX problems are clearly impacting the company's Commercial Airplanes segment as Q1 revenue fell 9% yr/yr to $11.82 bln, "reflecting lower 737 deliveries partially offset by favorable mix," according to the press release. As previously disclosed, its Commercial Airplanes segment delivered 149 airplanes in Q1. Also, it was good to see that the production rate for the 787 has increased to 14 airplanes per month.
According to the press release, the Commercial Airplanes segment "captured several widebody orders during the quarter, including orders for 18 777X airplanes for British Airways parent company IAG, 20 787 airplanes for Lufthansa, and 10 787 airplanes for Bamboo Airways." Segment backlog "remains healthy with over 5,600 airplanes valued at $399 billion." Its Defense, Space & Security segment saw revenue increase 2% yr/yr to $6.61 bln.
The stock is trading higher on the Q1 report despite the suspension of the full year guidance. Our sense is that investors are not too surprised by the guidance getting pulled as there is a lot of uncertainty regarding when the 737 MAX issues will get resolved. While the 737 MAX issue is a near-term problem for Boeing, it's a world class company and the problem will get fixed. A year from now, we think this will be a non-issue. It may wind up being a good buying opportunity.