NEW YORK—Aerospace giant Boeing Co. saw its earnings plunge by a third in the second quarter because of repeated delays with a military fuel tanker.
The Chicago-based company posted a US$1.11 billion net profit July 22, down from $1.65 billion during the same period last year.
The bulk of that drop is attributed to a $536 million after-tax charge Boeing took on the Air Force’s KC-46 Pegasus Tanker, a midair refuelling plane Boeing is building off its commercial 767 jet frame. The company said it has faced higher engineering and manufacturing costs to complete certification and initial production of the military aircraft.
To date, Boeing has booked $1.26 billion in charges related to the tanker project, according to Wolfe Research.
The airplane builder posted revenue of $24.54 billion in the period, up 11 per cent from the same period last year. The profit worked out to $1.59 a share, down from $2.24 during the same period last year.
That increased revenue mostly came from faster production of its commercial planes. Boeing takes a deposit when a jet order is made but doesn’t collect the bulk of the cash until a jet is delivered. The company delivered 197 commercial jets during the quarter, up from 181 during the same period last year.
“Record commercial airplane deliveries to customers worldwide drove solid revenue growth,” the company’s new CEO, Dennis Muilenburg said in a statement.
Tuesday night, right before Wednesday’s earnings release, Boeing did announce some good news: FedEx is ordering 50 new 767 cargo freighters with the option to purchase more.
The 767 is nearing the end of its production cycle, replaced by the more fuel-efficient 787, also known as the Dreamliner. Before this order, there were only 39 of them ordered but not delivered. That does not include the KC-46 tankers which use the same body but with major design modifications.
Boeing is producing the jet at the sloth-like rate of 1.5 new planes a month. The 737, its most popular model, has a production rate of 41.5 new jets a month.
Boeing also lowered its full-year earnings outlook to a range of $7.70 to $7.90 per share, down from $8.10 to $8.30 a share.
Boeing shares have climbed 12 per cent since the beginning of the year, while the Standard & Poor’s 500 index has climbed almost 3 per cent. The stock has increased 9.5 per cent in the last 12 months.