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July 19, 2019, 7:07 a.m. EDT

Boeing to see $5.6 billion hit on 737 Max groundings

Aircraft maker puts a price tag on 737 Max debacle, and shares rise

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By Claudia Assis, MarketWatch


Reuters
Workers attend a ceremony marking the first delivery of a Boeing 737 Max 8 airplane to Air China in December. The global fleet has been grounded since March.

Boeing Co. said late Thursday it will record an after-tax charge of $4.9 billion, or $8.74 a share, in the second quarter in connection with the 737 Max groundings.

See also: Boeing 737 Max ‘stigma’ to fade

The charge will result in a $5.6 billion dent in revenue and pre-tax earnings in the quarter, Boeing said. Boeing is expected to report second-quarter earnings on Wednesday.

Boeing /zigman2/quotes/208579720/composite BA +1.10%   also warned that the estimated costs to produce the aircraft increased by $1.7 billion in the second quarter, primarily due to higher costs associated with a longer-than-expected reduction in the production rate.

Related: Raytheon, United Tech merger would create aerospace and defense ‘behemoth’

The increased costs will reduce the margin of the 737 program in the second quarter and in future quarters, the company said.

The 737 Max family has been grounded worldwide since March after a second fatal crash in less than five months. Boeing has been working on a software fix for one of the plane’s anti-stall features, believed to be involved in the crashes.

Shares of Boeing rose 1.6% in the extended session Thursday. It had ended the regular trading session down 2.3%. The stock is up 12% this year, compared with gains of 17% for the Dow Jones Industrial Average, /zigman2/quotes/210598065/realtime DJIA +0.14%  of which it is a component.

Analysts polled by FactSet expect Boeing to report adjusted earnings of $1.80 a share on sales of $20.3 billion in the quarter. That would compare with adjusted earnings of $3.33 a share on sales of $24.3 billion a year ago.

Earlier this week, United Airlines /zigman2/quotes/205037281/composite UAL +2.20%   and American Airlines /zigman2/quotes/209207041/composite AAL +0.03%   announced more flight cancellations due to the grounding.

/zigman2/quotes/208579720/composite
US : U.S.: NYSE
$ 379.76
+4.13 +1.10%
Volume: 3.63M
Sept. 13, 2019 6:30p
P/E Ratio
44.47
Dividend Yield
2.16%
Market Cap
$213.70 billion
Rev. per Employee
$660,961
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/zigman2/quotes/210598065/realtime
US : Dow Jones Global
27,219.52
+37.07 +0.14%
Volume: 255.26M
Sept. 13, 2019 4:56p
loading...
/zigman2/quotes/205037281/composite
US : U.S.: Nasdaq
$ 91.35
+1.97 +2.20%
Volume: 3.00M
Sept. 13, 2019 4:00p
P/E Ratio
9.26
Dividend Yield
N/A
Market Cap
$23.47 billion
Rev. per Employee
$448,946
loading...
/zigman2/quotes/209207041/composite
US : U.S.: Nasdaq
$ 29.95
+0.01 +0.03%
Volume: 7.13M
Sept. 13, 2019 4:00p
P/E Ratio
8.99
Dividend Yield
1.34%
Market Cap
$13.34 billion
Rev. per Employee
$345,547
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Claudia Assis is a San Francisco-based reporter for MarketWatch. Follow her on Twitter @ClaudiaAssisMW.

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