Boeing's Q2 earnings fell short of analyst expectations, reporting a non-GAAP loss of $2.90 per share, $1.00 worse than the consensus of a $1.90 loss. Revenue declined by 14.6% year-over-year to $16.87 billion, missing the consensus estimate of $17.35 billion. The company's backlog remains robust at $516 billion, including over 5,400 commercial airplanes.
Despite the disappointing financial results, CEO Dave Calhoun emphasized the company's ongoing efforts to enhance its quality management system and safety measures. Boeing has not provided full-year cash flow guidance in recent quarters, focusing instead on these critical improvements.
Boeing announced that its Board of Directors has elected Robert K. "Kelly" Ortberg as the new president and chief executive officer, effective August 8, 2024. Ortberg, who will also join Boeing's Board of Directors, succeeds Dave Calhoun, who announced his retirement earlier this year after serving as president and CEO since January 2020. Ortberg, 64, brings over 35 years of aerospace leadership, having started his career at Texas Instruments and later holding significant roles at Rockwell Collins and RTX. He also serves on the Board of Directors of Aptiv PLC and is the former Chair of the Aerospace Industries Association Board of Governors. Ortberg has a degree in engineering which was viewed as crucial given the supply issues the company has faced.
The top and bottom line miss is being viewed as a "kitchen-sink" quarter, meaning BA is front loading all the bad news for investors. The CEO announcement is critical as investors as it points the company in a fresh new direction under the tutelage of an engineering who will have a keen eye on the production issues facing the company. The stock is attempting to break out above the $190 area on the news.
The Commercial Airplanes segment experienced a significant decline, with Q2 revenue falling 32% year-over-year to $6.00 billion and an operating margin of -11.9%. This drop was attributed to lower deliveries and higher period costs, including increased R&D expenses. The 737 program saw gradual production increases, with plans to reach 38 units per month by year-end, while the 787 program aims to return to five units per month. The segment delivered 92 airplanes during the quarter, and the backlog includes over 5,400 airplanes valued at $437 billion. The planned acquisition of Spirit AeroSystems and the commencement of FAA certification flight testing for the 777X program were notable developments.
The Defense, Space & Security segment reported a 2% year-over-year decline in Q2 revenue to $6.02 billion, with a substantial operating margin drop to -15.2%. This was primarily due to $1 billion in losses on fixed-price development programs, including a $391 million loss on the KC-46A program, exacerbated by supply chain constraints and commercial production slowdowns. Despite these challenges, the segment secured several key contracts, including seven MH-139A helicopters for the U.S. Air Force and the first CH-47F Block II Chinook for the U.S. Army. The segment's backlog stands at $59 billion, with 31% from international customers.
Global Services was the bright spot, with Q2 revenue rising 3% year-over-year to $4.89 billion and an operating margin of 17.8%. This growth was driven by higher commercial volume and favorable product mix. The segment also secured significant contracts, such as the Apache performance-based logistics contract with the U.S. Army and FliteDeck Pro service agreements with Hainan Airlines and Ryanair. These achievements highlight the segment's resilience and strategic importance within Boeing's overall operations.
Despite the challenging quarter, Boeing's outlook remains cautiously optimistic. The company continues to focus on its comprehensive safety and quality plans while making strategic acquisitions like Spirit AeroSystems to stabilize operations. The robust backlog and ongoing efforts to increase production rates in key programs indicate a potential for recovery and growth. However, the rising costs associated with the expansion in cloud and AI infrastructure pose a challenge to maintaining margins.
In summary, Boeing's Q2 results highlighted significant struggles in the Commercial Airplanes and Defense, Space & Security segments, which were offset to some extent by the performance of Global Services. The company's continued emphasis on safety, quality, and strategic acquisitions underscores its commitment to long-term stability and growth. However, meeting high investor expectations and managing rising costs will be critical as Boeing navigates through the financial implications of these challenges.