An update on aerospace developments both civil and military


24 Apr 2014 – It is good to see that Boeing has been able to raise its core earnings forecast for 2014 up to between $7.15 and $7.35 per share. While Q1 profits declined 13% and the operating margins slipped to 7.5%, for a company that has had more than its share of problems of late these are not bad results. Q1 revenue rose 8% to $20.47bn with Boeing Commercial itself showing a 19% rise to $12.74bn. Although I have long disliked quarterly reporting and most usually give such figures a fairly wide berth in this case I consider Boeing’s results worthy of comment. Although net earnings were down 13% due to changes in the retirement plan, the company says that 2014 profits will be flattered to an extent by a tax settlement. Remembering that in Q1 2013 deliveries of 787 planes had been virtually halted  – Q1 2014 has witnessed the normalisation of deliveries – it is good to see that the 787 production rate is now at 10 aircraft per month. The company expects to deliver between 715 and 725 commercial aircraft this year of which 110 will be 787 aircraft. The current order backlog for Boeing Commercial stands at an amazing 5,100 planes – worth an estimated $374bn.

More worryingly perhaps is that revenues from Boeing Defense Space and Security fell 6% and that within this Boeing Military Aircraft revenue fell 13%. Within a total Boeing Group order backlog of $439.8bn the Defense, Space and Security division order backlog stands at $66bn. If this 35% represents orders form international customers, it is clear that Sequestration has had its effect and it will force US defense companies to chase more business from potential foreign government customers.

Having received large new orders from China recently and collected record orders for the 777 from the Dubai Air show last year it is good to see Boeing slowly but surely moving forward in the right direction. There remains more work to do but it is good to see the company returning to form.

In other news:

Speaking of big orders, confirmation that the Australian government has approved the purchase of an additional 58 F-35 Joint Strike Fighter aircraft from Lockheed Martin (taking the total number of this type of aircraft to 72) is great news not only for Lockheed Martin but for the UK which has a 15% build share in the JSF programme in its capacity as a full Tier One partner. When I visited the F-35 manufacturing facilities in Fort Worth recently I saw the first F-35 aircraft for Australia in production and also the first for Italy as well. This is a great aircraft programme one which will extend beyond the 3,000 aircraft currently scheduled over the next twenty five years. It is great news for UK jobs and particularly for BAE Systems which produces various parts of the aircraft at its Samlesbury plant in Lancashire.

Howard Wheeldon FRAeS
Wheeldon Strategic Advisory
Tel: 07710 779785

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