Boeing Co. (BA), one of the world's leading aerospace companies, develops and manufactures commercial jets, military aircraft, weapons systems, and strategic defense and intelligence systems. The company offers services and support to customers globally, and provides financing for orders and deliveries. One of Boeing's biggest customers is the U.S. government, which accounted for 39% of total revenue in 2019.

One of Boeing's biggest rivals, especially for commercial aircraft, is Europe-based aerospace firm Airbus SE (EADSY). Boeing also has aerospace rivals based in Russia, China, and Japan. Additionally, the company's defense and space business faces competition from major players like Lockheed Martin Corp. (LMT), Northrop Grumman Corp. (NOC), Raytheon Co. (RTX), General Dynamics Corp. (GD), U.K.-based BAE Systems PLC (BAESY), and Elon Musk's Space X.

Key Takeaways

  • Boeing produces commercial and military aircraft, weapons systems, strategic defense and intelligence systems, and related products and services.
  • Commercial Airplanes is Boeing's largest revenue source, despite being hurt by the 737 Max grounding.
  • Boeing has resumed 737 Max production, but is waiting for regulatory approval to begin deliveries.
  • COVID-19 is likely to hurt demand for Boeing aircraft due to plunging commercial passenger travel.

Boeing's Financials

Boeing posted a net loss of $0.6 billion on revenue of $76.6 billion 2019, which fell 24.3% compared to a year earlier. The drop was largely due to the grounding of Boeing's 737 Max passenger jet in March, 2019 by the Federal Aviation Administration (FAA) after being involved in two fatal air crashes. Boeing also posted an additional $8.3 billion reduction in revenue to account for estimated concessions and other considerations to customers for delivery disruptions related to the 737 Max grounding.

As a point of reference, in 2018, the year prior to the grounding of the 737 Max, Boeing reported net income of $10.5 billion on $101.1 billion of revenue. That year, net income rose 23.7% on a 7.6% increase in revenue.

Boeing's troubles continued into the first quarter of 2020. The company posted a net loss of $0.6 billion for the three-month period that ended March 31, 2020. Revenue was down 26.2% year-over-year (YOY). The company said that the COVID-19 pandemic along with the still-grounded 737 Max was having a significant adverse impact on business. Boeing said it expects revenue, earnings, and operating cash flow to be significantly reduced in future quarters.

Boeing’s Business Segments

Boeing operates its business through four segments: Commercial Airplanes (BCA); Defense, Space & Security (BDS); Global Services (BGS): and Boeing Capital (BCC). The company provides a breakdown of revenue and earnings from operations for each of these segments. The pie chart for earnings from operations pictured above does not include segments that reported a loss for the period, such as Boeing's Commercial Airplanes segment.

Commercial Airplanes (BCA)

Boeing's commercial airplane segment develops, produces and markets commercial jet aircraft and provides fleet support services, primarily for the global airline industry. The segment supplies jetliners to meet global airlines' varying requirements for transporting passengers and cargo. In 2019, the segment posted a loss from operations of $6.7 billion. Revenue fell 43.9% to $32.3 billion, comprising about 42% of Boeing's total revenue. BCA is the segment responsible for producing the Max 737, and was thus hit hard by the aircraft's grounding in March 2019.

Defense, Space & Security (BDS)

Boeing's BDS segment researches, develops, produces, and modifies military aircraft and weapons systems for strike, surveillance, and mobility. The segment also researches, develops, produces, and modifies strategic defense and intelligence systems, as well as satellite systems. The segment's top customer is the U.S. Department of Defense, which accounted for 84% of its revenue in 2019. Earnings from operations grew 57.4% during 2019 to $2.6 billion, comprising nearly 49% of the total. Revenue fell 0.6% to $26.2 billion, comprising 34% of the total for all segments.

Global Services (BGS)

Boeing's global services segment offers services to its commercial and defense customers around the globe. The segment provides a wide range of platforms, systems, products and services. These include supply chain and logistics management, engineering, maintenance and modifications, upgrades and conversions, spare parts, and data analytics and digital services. Earnings from operations grew 6.3% in 2019 to $2.7 billion, comprising about 51% of the total. Revenue grew 8.3% to $18.5 billion, comprising nearly 24% of the total for all segments.

Boeing Capital (BCC)

Boeing Capital provides customers with financing to buy and take delivery of their orders, and manages the parent company's overall financing exposure. The segment's portfolio is comprised of equipment under operating leases, sales-type/finance leases, notes and other receivables, assets held for sale or re-lease and investments. Earnings from operations fell 64.6% during 2019 to $28 million, comprising a small fraction of the total. Revenue fell 10.9% to $244 million, comprising a tiny share of Boeing's total revenue.

Boeing’s Recent Developments

Boeing announced at the end of May that it had resumed production of the 737 Max after extensive inquiries by U.S. and global aviation authorities. The company had built up its inventory of 737 Max airplanes in storage to approximately 400 in December 2019 when it made the decision to suspend production the following month. Boeing said in its Q1 earnings report that it expects to receive regulatory approval to resume deliveries of the 737 Max sometime during the third quarter of 2020. Even with this resumption, the ongoing coronavirus pandemic and its negative impact on commercial air traffic will place additional downward pressure on demand for commercial aircraft.