Cereal Killer

Boeing: A Lot Of Pain With Light At The End Of The Tunnel

Daniel JonesIf there is one major industrial conglomerate on the market that has been faced with an inordinate amount of pain in recent months, it would have to be Boeing (BA). The airplane manufacturer and services provider has been slammed by the grounding of its 737 Max aircraft. For months, investors wondered what the full impact of this would be. With the release of its fourth-quarter earnings release for its 2019 fiscal year on January 29th, market participants are finally starting to get a glimpse at the damage. Truth be told, it ain't pretty, but when you consider where Boeing is and the resources at its disposal, this is a short-term bump (a big one), but not something that will affect the company's true, long-term potential much. As the saying goes, buy when there's blood in the streets, even if it's your own blood.

A lot of pain

No matter how you stack it, the financial picture at Boeing is less than ideal. For starters, consider the revenue generated by the conglomerate during its fourth quarter last year. According to management, this figure came out to $17.91 billion. This represents a 37% decline from the $28.34 billion the company generated the same quarter a year earlier. The revenue figure was actually $3.85 billion lower than analysts anticipated, making this a rather substantial stumble for the firm. As a result of this, total annual revenue for 2019 came out to $76.56 billion, 24% below 2018's level of $101.13 billion.

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For those who think that the pain would have only come from the company's Commercial Airplanes business, think again. Year-over-year, that segment's revenue did tank 44%, but the company's Defense, Space, and Security segment also reported a decline in sales of 1%. This doesn't sound like much, but it's skewed by the early part of 2019 when results were still strong. In the fourth quarter, this latter segment's revenue was down 13% year-over-year. While its Global Services business saw annual revenue grow 8% compared to 2018, fourth-quarter results were down 5%.

Though it may be hard to believe, the bottom line was uglier for the business than the top line. Based on the data provided, Boeing saw a net loss in the quarter of $1.01 billion. This represented a decline of nearly $4 billion from the $3.42 billion gain the company saw during the fourth quarter of its 2018 fiscal year. As a result of this substantial loss, the company actually reported a loss of $636 million for 2019 as a whole. That's its first loss for a year in over two decades and compares to the $10.46 billion in earnings the company generated in 2018.

Net income/loss is incredibly important for a firm, but more important than that even is cash flow. Operating cash flow for the fourth quarter totaled -$2.22 billion while free cash flow was -$2.67 billion. A year ago, these figures were $2.95 billion and $2.45 billion, respectively. The fourth quarter wasn't the only tough time for Boeing from a cash flow perspective though. The company actually saw a net outflow of cash during 2019 in the amount of $4.28 billion. This is worlds apart from the net inflow of $15.32 billion management reported for the company's 2018 fiscal year.

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At first glance, it may seem amazing, then to know that the company's cash and debt position did not change all that much during 2019. The company ended the year with $10 billion in cash and cash equivalents on hand, down only $0.9 billion from 2018's end. Debt, meanwhile, rose from $24.7 billion to $27.3 billion. These are not monumental changes. That said, where cash changes show up, on a true net basis, can be deceiving. When a big firm like Boeing is struggling, it has the ability to stick it to suppliers and it looks like that's precisely what happened. Year-over-year, the business saw its accounts payable rise by $2.64 billion. Its accrued liabilities rose even further, a full $8.06 billion. There are other areas where, when examined, it becomes clear just how stretched the company was just to achieve the results that it did.

Mrdooks

A billion here, a billion there, pretty soon you'll be talking real money

Geronimo17

A long way to go but it seems the 737 Max is close to getting the green light. Should be interesting to watch all the new metal make it's way out to the world wide fleet and United's!