Aviation giant Q2 performance exceeds expectations, Airbus adjusts tactics, Boeing's cash flow unexpectedly surges, stock price rises over 7% | Earnings Report

European and American aviation giants Airbus and Boeing performed better than expected in the second quarter, but the CEOs of both companies pointed out that aircraft manufacturers are facing a "complex" operating environment.

On Wednesday, July 26, Airbus released its earnings report and its shares rose slightly by over 0.1% in the European stock market in Paris. In the American stock market, Airbus shares rose more than 1% during early trading.

Boeing announced that its second-quarter revenue exceeded expectations, with a significant increase compared to the same period last year, but the increase was not as severe as expected. Furthermore, not only did it not "burn money" as the market expected, but it also generated a large amount of positive free cash flow.

After the earnings report was released, Boeing's stock price opened 3.7% higher on Wednesday and rose more than 7% during trading.

Airbus reaffirms delivery target of 720 aircraft this year, abandons A320 monthly production target of 75 aircraft, calls it a tactical adjustment

Also on Wednesday, Airbus announced that its second-quarter revenue and profit exceeded expectations, with revenue for the first half of the year lower than expected, but profit higher than expected:

In the second quarter, revenue reached 15.9 billion euros, higher than analysts' expectations of 15.75 billion euros; the adjusted earnings before interest and taxes (EBIT) for the quarter was 1.85 billion euros, higher than analysts' expectations of 1.75 billion euros.

For the first half of the year, revenue reached 27.66 billion euros, lower than analysts' expectations of 27.91 billion euros; the adjusted EBIT for the first half was 2.62 billion euros, higher than analysts' expectations of 2.47 billion euros; the EBIT for the first half was 1.89 billion euros.

Airbus announced that it delivered 316 commercial aircraft in the first half of the year and still expects to deliver approximately 720 commercial aircraft this year. It is also expected that the A320 aircraft production rate will reach 75 aircraft per month by 2026.

However, Airbus did not mention the target of producing 65 aircraft per month by the end of next year. Instead, it stated that it will make a so-called "tactical adjustment" to the production plan in order to meet the current production speed of the A320, which is currently at a level of approximately 50 aircraft per month.

The media speculates that Airbus' adjustment may be aimed at gaining more flexibility in production to deal with the ongoing impact of supply chain issues.

Airbus maintains some of its full-year performance guidance unchanged and still expects an adjusted EBIT of approximately 6 billion euros, roughly in line with analysts' expectations of 6.06 billion euros.

At the same time, Airbus has lowered its forecast for adjusted free cash flow (FCF) from 4.7 billion euros to 3 billion euros, a decrease of 36%, which is lower than analysts' expectations of 3.32 billion euros.

Boeing's EPS loss lower than expected, positive free cash flow of 2.58 billion US dollars

Before the US stock market opened on Wednesday, July 26, Boeing announced:

• Its operating revenue for the second quarter of this year was $19.75 billion, an increase of approximately 18.6% compared to the same period last year, and analysts expected a year-on-year increase of about 11% to $18.53 billion.
• In the second quarter, adjusted EPS was a loss of $0.82 per share, slightly better than analysts' expected loss of $0.84 per share, but worse than the loss of $0.37 per share in the same quarter last year.
• Adjusted free cash flow in the second quarter was $2.58 billion, while analysts estimated a negative $73.6 million.
• Operating cash flow in the second quarter was $2.88 billion, compared to analysts' expectation of $435.6 million.

Boeing's Commercial and Defense Businesses Revenue Exceed Expectations, Defense Unexpectedly Reports a Loss of $527 Million

In the second quarter, Boeing's revenue from its commercial aircraft and defense businesses exceeded expectations. The revenue from commercial aircraft was $8.84 billion, surpassing analysts' expectation of $7.64 billion. The revenue from defense, space, and security businesses was $6.17 billion, slightly higher than analysts' expectation of $6.16 billion.

However, Boeing's defense business reported a loss of $527 million in the second quarter, far below analysts' expected profit of $102.3 million. A year ago, this business recorded an operating profit of $71 million. The loss was mainly due to the delay in the first manned flight of the Starliner spacecraft, which resulted in a loss of $257 million for Boeing. In addition, the high-cost production delays of the T-7 trainer aircraft and MQ-25 aerial refueling aircraft resulted in losses of $189 million and $68 million, respectively.

The loss in the defense business reflects the challenges Boeing faces in terms of employee attrition, parts shortages, and inflation. In the past decade, Boeing won some fixed-price contracts through bidding, and at that time, the contract price was close to achieving a balance between revenue and expenses. However, in recent years, high inflation has had a negative impact on these contracts.

However, some analysts pointed out that as long as Boeing's mainstream commercial aircraft business continues to improve, investors will be patient and wait for Boeing's defense business to turn around.

Boeing's Second Quarter Deliveries Exceed Expectations by 21%, Significantly Increase 737 Production Rate

In the second quarter, Boeing delivered a total of 136 aircraft, approximately 21% higher than analysts' expected deliveries, and a 12.4% increase compared to 121 aircraft delivered in the same period last year.

Similar to the previous two quarterly reports, Boeing still predicts that it will deliver between 400 and 450 units of its popular model, the Boeing 737, this year. Boeing also plans to increase the production rate of the 737 program to 50 aircraft per month by 2025/2026, which is two years from now.

Boeing has raised the monthly production rate of the 737 aircraft to 38 units. According to estimates by the media, this represents a 23% increase in production speed compared to the previous rate. Boeing plans to increase the production rate of the 787 Dreamliner aircraft to 4 per month, with the goal of reaching 5 per month by the end of the year, and expects to deliver 70 to 80 aircraft this year.

Boeing expects cash flow of hundreds of millions of dollars in the third quarter, and the commercial aircraft business is expected to be profitable by the end of this year.

Boeing also reiterated its full-year free cash flow guidance of $3 billion to $5 billion.

Brian West, Boeing's Chief Financial Officer, stated that the company's cash flow in the second quarter benefited from advance payments from customers. It is expected that the company's cash flow in the third quarter will be "hundreds of millions of dollars".

West mentioned that the expected cost reduction for the 777X series aircraft production delay is $1 billion, a decrease of $500 million from previous expectations. Boeing's business jet business is expected to be profitable by the end of this year.