Boeing Company expects broad support from Pentagon and Congress to buoy sales this year as the planemaker develops an unmanned Navy refueling drone and ramps up deliveries of its F/A-18 fighter and KC-46 tanker.
Revenue of as much as $27.5 billion in the Chicago-based company’s defense unit, its second-largest business, will help drive overall sales of $111 billion, a gain of 10 percent, executives told investors on an earnings call Wednesday.
While funding for NASA, the U.S. space agency affected by a monthlong government shutdown, hasn’t yet been passed, Congress has “also demonstrated robust support for key space exploration programs” that the company supplies, CEO Dennis Muilenburg said.
Boeing garnered revenue of $101.1 billion last year, driven by a lucrative fourth quarter that included higher fighter-jet sales in its military unit and increasing deliveries of commercial planes like the composite-plastic 787 Dreamliner. Earnings of $16.01 a share topped the $15.11 average estimate from analysts surveyed by FactSet.
LIke other military contractors, Boeing has benefited from increased military spending under the Trump administration and is poised to take advantage of its emphasis on extraplanetary development and exploration.
“In the last five years, we have invested nearly $35 billion in key strategic areas of our business,” Muilenburg said. During the previous quarter, the planemaker had written down profits in its defense unit by $691 million to cover costs on initial work for the MQ-25, a refueling drone that can take off and land on an aircraft carrier, and the T-X trainer for Air Force fighter pilots, a fraction of their ultimate value.
Muilenburg has said the two programs offer a potential $60 billion long-term revenue stream. Landing contracts for military aircraft likely to be in use for much of the century revitalizes a Boeing business that had relied heavily on production of older models after losing the lucrative F-35 fighter to Lockheed Martin and the B-21 long-range bomber to Northrop Grumman.
Boeing delivered the first two KC-46 refueling tankers, upgrades based on its commercial 767 wide-body airliner, to the Air Force earlier this month, Muilenburg said, and the service has accepted two more. The company plans to build 179 of the tankers to replace the Air Force’s existing fleet of KC-135s, which make up the core of the service’s mid-air refueling capability and have been flown for more than 60 years.
“We look forward to working with the Air Force and the Navy during their initial operational test and evaluation of the KC-46, as we further demonstrate the operational capabilities of this next-generation aircraft,” the CEO said. Boeing won the contract to design and develop the next-generation tanker during former President Barack Obama’s first term.
In addition to its wealth of government deals, the planemaker can boast a 30-year alum in a high-ranking Trump administration post. Pat Shanahan, who began his Boeing career in 1986 and took on the role of deputy defense secretary in 2017, was named acting secretary at the beginning of this year following the departure of Jim Mattis.
His nonmilitary background and reported comments about Boeing rival Lockheed Martin, however, have already drawn scrutiny. Shanahan, who signed an ethics agreement promising to avoid Defense Department matters related to his former employer, has brushed off complaints that he’s the “man from Boeing” as “just noise.”
Sales in Boeing’s defense unit, the company’s second-largest business, climbed 16 percent to $6.1 billion in the three months through December, Boeing said Wednesday. Revenue in the bigger commercial planes division surged 12 percent to $17.3 billion, and deliveries — when the planemaker books a large portion of its revenue — rose 14 percent. The company turned over its 787th Dreamliner, and buyers picked up 111 single-aisle 737 MAX aircraft.
Deliveries of 737s, one of the world’s most widely-flown planes, will increase to 52 a month this year, and Boeing has amassed a backlog of 2,700 orders for the aircraft, Muilenburg said. A spike in fuel prices last year prompted many carriers to re-emphasize upgrading their fleets with more fuel-efficient planes such as the MAX variant.
“We remain highly confident in our outlook, which forecasts demand for nearly 43,000 new airplanes over the next 20 years, which will help double the size of the global fleet,” Muilenburg said. “These long-term demand fundamentals, combined with healthy market conditions and a robust backlog, provide a solid foundation for our planned production.”
