Unfortunately, as these are not announced until late in the day London time, I was unable to provide the now traditional quick comment on Boeing [FY17] preliminary results yesterday. However, it would be very remiss of me to let such an excellent set of result pass so here goes:
While the US International Trade Commission may have ruled against Boeing in the dispute against the Canadian aircraft manufacturer Bombardier last week there can surely be little doubt that pretty well everything else appears to be going very well for the Chicago based airplane manufacturer. Not only did the company announce record profits of $8.2 billion last year on revenue of $93.4 billion but it gave investors the pleasure of witnessing a 76% rise in earnings per share not to mention the raising of earnings guidance for the current year to between $15.90 and $16.10 per share.
Performance from all sections of the business was excellent. Having added order for 912 new commercial aircraft last year Boeing ended the year with an order backlog of 5,864 planes. The Defense business ended the year with a $50 billion order backlog of which 40% comes from international customers. Importantly the troubled KC-46 tanker programme is now making very good progress and the company expects to deliver 18 to the Air Force this year. Last but not least and the result of a divisional shake up last year, the Global Services business which are predominantly MRO support and which the company anticipates will be worth some $2.6 trillion in sales over the next decade ended the year with $6 billion of order.
Cash generation was excellent and in a year that has seen the market value of the company double one may be forgiven for asking the question ‘is there anything else that the company can bring out of its hat for shareholders? The answer is yes – Boeing can and will provide shareholders with even more benefits and I see few if any clouds on the short or medium term horizon. Is it all in the share price? Being no longer registered with the financial regulator I am no longer in a position to answer that but what I can say is that Boeing would have to make a dreadful error of judgement to see the confidence that has built up around the company begin to evaporate.
With output expected to further rise and the benefit of continuing efficiency measures expected to show through in 2018 not to mention the positive impacts of the Congress tax bill which in December agreed to lower tax rates and that perchance, will also bring Boeing taxation more into line with equivalent tax rates of its international competitors the outlook is good. Boeing continues to stress its intention to further invest in its future and we are left in no doubt that there is no intention to rest on its laurels.
All credit to Boeing Chairman, President and Chief Executive Officer Dennis Muilenburg for the brilliant job that he and his team have done not only in producing spectacular FY17 results but also in remotivating and reenergising the company.
As to what if anything happens next in its ‘C’ Series trade dispute, the possibility of a partnership with Brazilian aircraft manufacturer Embraer and also the long running WTO disputes between Boeing and Airbus and the US Government the EU, all that I can say is that I haven’t a clue. What I can be pretty sure about though is that an even more efficient Boeing looks set to enjoy another great year in 2018.
Boeing is of course very important internationally and the recent step up of investment in its UK facilities is a signal that should not be lost. Boeing is also an important supplier to the UK MOD and the proven aircraft capability that the company will supply to the UK over the next few years and the infrastructure investment that Boeing is putting in to what it rightly regards as a partnership with the UK should not be ignored.
CHW (London – 1st February 2018)
Howard Wheeldon FRAeS
Wheeldon Strategic Advisory Ltd,
M: +44 7710 779785