Boeing to Take $2 Billion in Q2 Charges

When Boeing Co. (NYSE: BA) reports earnings July 27, the company will recognize impacts to earnings of $2.05 billion on three different programs. We’ll have more detail later, but here’s the breakdown.

Boeing will write off $847 million ($1.33 per share) for two unsold 787 Dreamliner test planes. The company said that the two planes were built in 2009 and have flown more than 6,700 hours each and that Boeing will not invest the funds to refurbish the two planes for sale. This is an after-tax, non-cash charge.

An after-tax charge of $814 million ($1.28 per share) reflects lower estimated total 747-8 freighter production. The company announced a decrease to six planes a year through 2018, and has now determined that it will not raise that rate in 2019, as the company had originally planned.

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Third, Boeing will recognize an after-tax charge of $393 million ($0.62 per share) on the KC-46A tanker program. The charge reflects higher costs associated with previously announced program schedule and technical challenges, including implementation of the hardware solution to resolve the refueling boom axial load issue identified during flight testing, delays in the certification process and concurrency between late-stage development testing and initial production.

Last week the new tanker successfully refueled a C-17 cargo plane and an A-10 Warthog to complete its qualification tests and receive a contract from the Air Force to produce the first two deliveries of a total of 19 aircraft.

Boeing noted that prior guidance for 2016 revenues and cash is reaffirmed but that it will update earnings per share guidance on July 27.

Shares closed down about 0.9% Thursday, at $133.53 and traded down another 0.8% in the after-hours session.

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