Boeing Cash Flow Impresses

Wide-moat

Boeing’s revenue rose 6% year over year to $23.4 billion in the quarter, and GAAP operating margins expanded 30 basis points. The company’s core operating margins, which excludes pensions, expanded 220 basis points to 10.7% due to strong performance in both commercial airplanes and the defense business. However, margins contracted 80 basis points in the new services unit to 16.3%. We’d note that tanker charges weighed on Boeing’s operating margins during the first quarter of 2017, so these results are a bit flattered by an easy comparison. Nonetheless, rising 737 production and Boeing’s 50-basis-point upgrade of consolidated operating margin guidance for the full year indicates tangible improvements across the business.

Lower taxes, fewer shares, and higher operating profits combined to push core EPS, which excludes pensions, up $1.47, to $3.64 this quarter. Cash flow continues to impress, and Boeing delivered $3.1 billion of operating cash flow this quarter compared with $2.1 billion last year. Burn-down on 787 deferred production accelerated this quarter, dropping $668 million on a sequential basis. Management increased its operating cash flow guidance to $15.0 billion-$15.5 billion from approximately $15.5 billion; we’re moving up our cash flow forecast as well.

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