Boeing Q2 2020 Earnings Miss Expectations

on Jul 30, 2020
Updated: Dec 19, 2022

Boeing Q2 2020 earnings disappointed again – for the fourth consecutive quarter. The market expected -$2.53 EPS, and Boeing managed to deliver almost double that – negative $4.79.

The fall comes as the airline industry continues to face a tough time due to the COVID-19 health crisis. Leading to the company grounding its 737 Max fleet which weighed on the company’s bottom line. These two, together with a worldwide decline in aircraft deliveries and passenger traffic, are supposed to be priced in the earnings estimate. A negative surprise, such as the one delivered by Boeing, suggests more troubles ahead, even beyond what is known so far.

Financial Highlights of the Q2 2020 Earnings

Unsurprisingly, the company reported a loss. What was surprising was that it reported a loss almost double than expected.

On revenues of $11.8 billion for Q2 2020, it has a negative operating cash flow of $5.3 billion. However, the $32.4 billion in cash and marketable securities, combined with a backlog worth of $409 billion or 4,500 commercial planes, alleviated the disappointing numbers. Boeing share price closed the day at $166, -2.83% lower.

The problems for Boeing, besides the never-ending 737 Max saga, relate closely with the airline industry’s evolution post-COVID-19. If pre-crisis, the airline industry forecasted high numbers of passengers, following a record 2019, things collapsed to the ground.

Not only that passenger demand is down for the foreseeable future, but the problem is that no one knows for how long. If the virus persists, as it seems so after four months after the outbreak in the developed world, the airlines, and Boeing implicitly, may not have enough resources to survive.

As passenger traffic is estimated to reach pre-pandemic levels only in a couple of years, airlines will keep shrinking their fleet. Hence, fewer orders for aircraft manufacturers.

Boeing, though, runs a diversified business. It is not only the commercial aircraft deliveries that matter (where it competes with Airbus), but it has a strong defense, space, and services programs.

Also, in defense of the poor results presented yesterday, is that many of the production facilities were closed due to the lockdowns generated by the coronavirus crisis. The gradual reopening during the second part of the quarter was not enough to offset the negative impact it had on the company’s bottom line.

All in all, Boeing is active in an industry strongly affected by the pandemic – on top of the 737 Max grounding issues it had before. A bad combination during an economic recession.