737 Max jetliner pushes Boeing earnings down

But worldwide grounding won't ruin the 'prosperous company', expert says

Problems stemming from the worldwide grounding of the 737 Max aircraft drove Boeing's net earnings down 13 percent in the first quarter of 2019 compared with the first quarter of 2018, the company said on Wednesday in its quarterly earnings report.

Boeing said it expects to take about a $1 billion charge on its 737 Max jets, including the cost of upgrading software for the plane's automated anti-stall device and higher production costs spread over the life of the production run.

"I think Boeing bounces back," John Cochran, professor emeritus of aerospace engineering at Auburn University in Alabama and president of Eaglemark, an aviation consulting firm, told China Daily. "It's going to be serious as far as stockholders are concerned, but Boeing is a prosperous company and this won't ruin them."

Thirteen Wall Street analysts surveyed by Nasdaq rated Boeing's stock a "strong buy" and four rated it "hold". No analysts rated the stock "underperform" or "sell".

Goldman Sachs, a major New York investment bank, said Boeing's first quarter earnings of $3.75 a share, or $2.35 billion on revenue of $22.9 billion, were "in-line" with consensus estimates. In the first quarter of 2018, the company earned $4.15 a share on revenue of $23.38 billion.

Boeing's first-quarter commercial aircraft sales fell 8.7 percent year-on-year, but the company's capital defense, space and security divisions posted gains. Total first-quarter revenue fell two percent to $22.9 billion.

In January, Boeing said it had planned to deliver more than 900 planes this year, boosting sales and profits. However, in the wake of the Ethiopian Airlines crash last month, the company said it planned to cut production of 737 Max aircraft to 42 a month from 57, a reduction of nearly 20 percent.

Goldman Sachs set a 12-month price target - an estimate of future value of the stock - of $393 a share. However, Boeing repurchased shares valued at $2.3 billion in the first quarter of 2019 compared with $3 billion in the same quarter a year ago.

The significant buybacks have boosted the share price and Boeing's decision to suspend the program could weaken the stock in the future. Investors have sliced about $27 billion off Boeing's market value since the Ethiopian Airlines crash and now value the company at $212 billion.

Boeing's shares closed on Wednesday on the New York Stock Exchange at $375.46 a share, up $1.44, or 0.39 percent, from Tuesday's close. The 52-week range is $292.47 to $446.01 a share.

Boeing's 737 Max jets were grounded worldwide as the result of two crashes: the Ethiopian crash on March 10 and the Lion Air crash in Indonesia in October 2018. A total of 346 passengers and crew were killed.

The causes of the crashes have not yet been determined.

scottreeves@chinadaily.com

(China Daily 04/26/2019 page20)