Executive Briefings

Boeing's Defense Business Takes a Hit, But the Manufacturer Is Fighting Back

Boeing and its investors likely couldn't be happier with the first quarter 2014 earnings report: revenue rose 8 percent over the year-ago quarter, operating margins widened, and 2014 guidance got boost. The U.S. aerospace company ramped up deliveries for its 787 and 737 models to keep pace with demand, which in turn increased cash flow beyond analyst expectations. And a $374bn backlog of more than 5,100 aircraft guarantees that even if Boeing stopped booking new orders today it would take nearly a decade to deliver all the planes on order. But things don't appear quite so rosy in Boeing's Defense, Space & Security division.

Boeing's Defense Business Takes a Hit, But the Manufacturer Is Fighting Back

Defense revenues slipped somewhat, partially due to lower-than-expected deliveries of Boeing's submarine-hunting P-8 Poseidon, for which production isn't going quite as smoothly. With the Lockheed Martin-built F-35 set to replace various workhorse aircraft across the U.S. military (and the fleets of many of its allies) and overall reductions in big-ticket military buys across the globe, Boeing faces the closure of at least two major production lines (the C-17 cargo carrier and U.S. Navy workhorse F-18) and pressure on at least a few more. It also faces reduced service contracts and other ancillary revenues as other legacy systems approach end-of-life status.

A slowdown in Boeing's defense business is no insignificant matter for the company. In some years, it accounts for as much as half of the company's total revenues. Aerospace analysts have voiced concerns that the defense segment is the Achilles heel to the company's otherwise flourishing commercial jet business. But the BDS division isn't taking its punches lying down.

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Defense revenues slipped somewhat, partially due to lower-than-expected deliveries of Boeing's submarine-hunting P-8 Poseidon, for which production isn't going quite as smoothly. With the Lockheed Martin-built F-35 set to replace various workhorse aircraft across the U.S. military (and the fleets of many of its allies) and overall reductions in big-ticket military buys across the globe, Boeing faces the closure of at least two major production lines (the C-17 cargo carrier and U.S. Navy workhorse F-18) and pressure on at least a few more. It also faces reduced service contracts and other ancillary revenues as other legacy systems approach end-of-life status.

A slowdown in Boeing's defense business is no insignificant matter for the company. In some years, it accounts for as much as half of the company's total revenues. Aerospace analysts have voiced concerns that the defense segment is the Achilles heel to the company's otherwise flourishing commercial jet business. But the BDS division isn't taking its punches lying down.

Read Full Article

Boeing's Defense Business Takes a Hit, But the Manufacturer Is Fighting Back