Prime numbers (7/28/22)

Good morning. It's been a busy week of financial results so far, and there are more coming. Let's get right into it.

In today's newsletter:✈️ Aerospace juggernaut earnings📊 Prime contractor earnings 📝 The contract report

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Boeing Reports Q2 Earnings

Boeing ($BA) Q2 results fell short of Wall Street expectations yesterday, due to weaker defense sales and program delays. Robust commercial plane orders softened the blow, and the company stuck by its forecast to return to positive free cash flow this year.

The overall numbers:

• Operating cash flow = $100M

• Revenue = $16.7B, a 2% decrease year on year

• GAAP earnings per share = $0.32

• Core non-GAAP loss per share = $0.37

• Total backlog = $372B

Breaking out space:

• Revenue = $6.2B, a 10% decrease year on year

• Total backlog = $55B (33% of which comes from non-US customers)

Boeing’s Defense, Space & Security division attributed the decline in revenue to changes in fixed-price programs, unfavorable performance on other programs, and lower demand for derivative aircraft.

But those weren’t the only issues weighing on the business unit...

Starliner’s development setbacks almost certainly contribute as well. Boeing took a $93M Q2 charge for Starliner development, bringing the program’s cost overruns to $688M.

• Meanwhile, the MQ-25 refueling drone program cost Boeing $147M in Q2.

Beyond financials, Boeing’s shining space highlights from Q2 were the successful test flight of Starliner and the SLS wet dress rehearsal. With the second uncrewed orbital flight test out of the way, the next step is a crewed mission. The first crewed test flight is scheduled for sometime in Q4.

Boeing’s stock price fell slightly after the markets opened yesterday but quickly recovered to around its 5-day average.

"As we begin to hit key milestones, we were able to generate positive operating cash flow this quarter and remain on track to achieve positive free cash flow for 2022. While we are making meaningful progress, we have more work ahead.” said Boeing CEO Dave Calhoun.

Send this to someone who loves flying on 747s:

Moving Right Along to Airbus...

Airbus ($AIR) also reported financial results yesterday. Supply chain issues led the European aerospace giant to cut commercial aircraft estimates, but Airbus expects little short-term impact as it maintains its free cash flow targets.

The overall numbers:

• Revenue = €24.8B ($25.3B), a 1% YoY increase

• Free cash flow = €2B ($2.0B)

• Adj. EBIT = €2.6B (~$2.7B)

Breaking out space:

• Revenue = €5.1B ($5.2B), an 11% YoY increase

• Order intake = €6.5B ($6.6B)

• Adj. EBIT = €155M ($158M)

While space systems account for ~25% of Airbus’ Defense and Space division, the jump in revenue mainly grew from Airbus’ military aircraft biz and its Eurodrone contract. The sale of 20 Eurofighter jets to the Spanish Air Force also boosted Q2 with a 7% revenue increase over Q1.

Delays and inflation come for everyone, and aerospace contractors are no exception to this rule. Airbus attributed the 32% decrease in Adj. EBIT to the Ariane 6 delay, the impact of rising inflation on long-term contracts, and fallout from Western sanctions on Russia.

“Airbus delivered a solid H1 2022 financial performance in a complex operating environment, with the geopolitical and economic situation creating further uncertainties for the industry,” said Airbus CEO Guillaume Faury.

Share these results with your European analyst friends:

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In Other News

• Terran Orbital ($LLAP) says CAPSTONE has completed its second trajectory correction burn.

• Space Foundation valued the global space economy at $469B in 2021, which represents a 4.9% annual increase. YoY space spending jumped by the largest amount since 2014.

• The Fed hiked rates by 75 bips (basis points), or 0.75%, for the second consecutive time.

• Viasat is weighing a sale of its government unit’s encryption arm, Bloomberg reports, in a deal that could net the satellite operator ~$1.8B.

• Sotheby’s auctioned a jacket worn by Buzz Aldrin to the Moon for $2.8M, setting a new record for a flown-in-space artifact.

The Contract Report, Cont.

NASA awarded a $73M CLPS contract to a Draper-led team to deliver three science payloads to the lunar surface. The destination is Schrödinger Basin on the Moon’s farside. The mission will also see two Blue Canyon-manufactured satellites deployed into a cislunar orbit, so the payloads can phone home to Earth.

The View from Mars

Wednesday marked 25 years since NASA put a lander and its first rover on the Martian surface. Happy Bday, Pathfinder.