Second-quarter financial results that show higher revenue and earnings per share would typically please investors, but not for Boeing.
Instead, Boeing’s shares declined by as much as 3 percent after the results were announced. The price recovered to close at $355.92, representing a 0.6 percent loss on a trading day that was generally positive.
Investors were “rattled” by a $426 million charge against revenue due to cost overruns in Boeing’s KC-46 tanker program for the Air Force, Leeham News’ Dan Catchpole wrote. That assessment was seconded by other analysts.
“The KC-46 has returned to again haunt Boeing’s results,” Reuters quoted Vertical Research Partners analyst Robert Stallard as saying. “Management has previously expressed confidence that there would be no more tanker charges, and yet they keep coming.”
Charges associated with the program have mounted past the $3 billion mark.
Boeing CEO Dennis Muilenburg attributed the latest charges to costlier-than-expected modifications as well as snags encountered in the late stages of testing and certification. He told analysts that the plan to finish work on the first eight tankers has been “firmed up.”
The first tanker is now due to be delivered in October.
The reports were much rosier in other areas of Boeing’s business. Boeing Commercial Airplanes says it’s still on track to deliver 810 to 815 jets this year. Total company backlog grew to $488 billion, including nearly 5,900 commercial jets. Boeing Global Services raised its 2018 revenue outlook by half a billion dollars.
Overall revenue for the second quarter increased year over year by 5 percent, to $24.26 billion. Net earnings rose 26 percent to $2.2 billion, or $3.73 per share. Operating cash flow, however, declined 5 percent to $4.7 billion.
In addition to the charge for KC-46 cost overruns, there was a $148 million pre-tax charge attributed to a legal ruling that favored Spirit AeroSystems over Boeing.
Boeing raised its revenue outlook for the year by a billion dollars, to the range of $97 billion to $99 billion. The 2018 outlook for earnings per share was unchanged.