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Embattled Boeing enjoys skyrocketing stock price despite devastating revenue losses

The company’s results were “significantly impacted by COVID-19 and 737 MAX grounding,” it explained in its earnings call Wednesday.

Embattled Boeing enjoys skyrocketing stock price despite devastating revenue losses
[Photo: Ethan McArthur/Unsplash]

Boeing, the embattled aerospace manufacturer, posted its Q1 2020 earnings this morning—and the numbers are, unsurprisingly, poor.

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Boeing reported:

  • Revenue of $16.9 billion, down 26% from $22.9 billion year over year
  • Cash burn of $4.3 billion
  • Net loss of $641 million
  • Core loss per share of $1.70

The company’s results were “significantly impacted by COVID-19 and 737 MAX grounding,” it explained in its earnings call Wednesday.

Regardless, Boeing’s cash burn and core loss per share exceeded expectations—which were even worse—and Boeing’s stock was up more than 11% in midday trading.

Leading up to Q1, Boeing has been putting out financial fires on two fronts, starting a year ago with the fallout from its 737 Max tragedies. After two fatal crashes killed 346 people, Boeing’s flagship airliner was grounded in March 2019, costing the company an estimated $19 billion as of January 2020.

And with the coronavirus pandemic, air traffic has come to a near standstill and airlines have chopped service by unprecedented factors, which caused a 66% drop in Boeing’s commercial aircraft sales—a sector that accounts for 42% of the company’s revenue.

In response, Boeing unveiled plans to pare back production in line with demand, which would reduce its monthly output of 787 Dreamliners from 14 to 7 in the next two years and 777 twin-jets from 5 to 3 in the next year. For its 737 Max, formerly Boeing’s best-selling airplane, it’s targeting a “gradual increase to 31 per month” following the restart of production, which is reportedly slated for mid-2020.

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Boeing also said it would eliminate 10% of its jobs, or roughly 16,000 positions, through buyouts, attrition, voluntary layoffs, and involuntary layoffs.

At this time, Boeing said, “Access to additional liquidity will be critical for Boeing and the aerospace manufacturing sector to bridge to recovery, and the company is actively exploring all of the available options.”

A long-haul flight

The company is projecting optimism for the long term, citing predictions for “commercial aviation to revert to growth trend” as well as “stable global demand for our defense and space programs,” which provide 34% of the company’s revenue.

It’s perhaps on these points that Boeing is wrangling a “multibillion-dollar bond-fueled financing package” with investment banks that could generate more than $10 billion in liquidity, Reuters reported Tuesday, citing sources familiar with the matter. Reuters’ sources also said the company was considering applying for funds from the Federal Reserve and from the Treasury under a $17 billion program for companies “critical to maintaining national security”—although CEO Dave Calhoun was wary of giving up stakes to the government, a requirement of the Treasury’s program.

The Washington Post earlier reported that the Treasury’s program was designed with Boeing in mind—highlighting a likely reality that as America’s biggest aerospace manufacturer, Boeing is too valuable for the U.S. government to give up on, despite any quarterly slump.

Boeing also boasts an impressive backlog of orders across the commercial and defense, space, and security sectors worth $439 billion—although with the pandemic still raging, many of those orders may be at risk.

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