Does Boeing Revenue Shortfall Reflect More Discounting?

Boeing reaffirmed its 2015 guidance for core (non-GAAP) EPS in a range of $8.20 to $8.40 and full-year revenue in a range of $94.5 billion to $96.5 billion. The consensus estimates for 2015 before the report called for EPS of $8.49 on revenues of $94.79 billion. The company also reiterated its expectation to deliver between 750 and 755 commercial aircraft in 2015, up from the record 723 the company delivered in 2014.

During the quarter, the company repurchased 17 million shares for $2.5 billion, leaving $9.5 billion remaining under the current repurchase authorization, which is expected to be completed over approximately the next two to three years. Boeing also paid $600 million in dividends in the first quarter, an increase of about 25% per share compared to the same period in 2014.

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Boeing delivered 184 commercial aircraft in the quarter, up from 161 in the first quarter of last year, and revenue rose 21% to $15.4 billion. Operating margin, however, fell from 11.8% to 10.5%, “reflecting the dilutive impact of higher 787 deliveries.”

That impact is somewhat less than some analysts expected. The company reported $22.75 billion in advances and billings in excess of related costs, down from $23.18 billion in the fourth quarter of 2015. This represents the lion’s share of Boeing’s deferred production costs, and the decline is a positive sign for the 787 program and the company going forward.

Not so positive were sales in the defense, space and security division, which fell 12% from $7.63 billion in the first quarter a year ago to $6.71 billion this year. The big hit was to military aircraft, where sales fell 21%. Margins improved from 10.2% to 11.1%, and backlog in the division is now $60 billion, of which 37% represents orders from international customers.

Backlog in the commercial division now totals more than 5,700 airplanes worth $435 billion. Boeing booked 110 net new orders during the first quarter.

Boeing’s CEO said:

Our outlook for the full year remains positive as our teams work to efficiently deliver our portfolio of industry-leading aerospace products and services. We are also maximizing the expertise of our talented people across the company to accelerate development program milestones and improve affordability for our customers.

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Analysts’ higher expectations for full-year profitability and the company’s lower revenues in the first quarter are weighed on the stock in Wednesday’s premarket session. Boeing shares traded down about 1.2% at $151.50, in a 52-week range of $116.32 to $158.83. The consensus target price for the shares was around $161.00 before the report.