BA Boeing Co

By Jon Ostrower 

Boeing Co. swung to its first quarterly loss in nearly seven years, as it looks to move past blunders developing new products over the past decade.

The disappointing results come about a week after the world's largest plane maker said it would take $3 billion of costly charges to three important airplane programs. The charges to the Boeing's advanced 787 Dreamliner, iconic 747 jumbo jetliner and its new aerial refueling tanker were largely expected, but underscore the challenges still facing some crucial projects.

The loss marks the completion of a bumpy first year on the job for Boeing's new chief executive, Dennis Muilenburg. Shares have fallen roughly 3.5% since Mr. Muilenburg took over the top spot in July 2015.

The advanced Dreamliner program has been the most costly for Boeing over the years, with the company forced to spend tens of billions of dollars more than first anticipated, with the latest bill for production at $27.7 billion. The company said it would begin to make money on each delivery by the end of the year but only after having built around 500 aircraft since 2011, or around 40% of its orders.

Boeing also said in a regulatory filing that it was "reasonably possible" it may end production of its iconic 747 jumbo after sluggish sales of the updated passenger and cargo versions. It is halving output to just six a year from September and has outstanding orders for just 21 jets. Two are expected to replace the existing U.S. presidential fleet.

Boeing reported a loss of $234 million, or 37 cents a share, compared with a year-earlier's profit of $1.1 billion, or $1.59 a share, a year earlier. Revenue rose 1% to $24.8 billion.

However some metrics managed to beat analyst expectations. Adjusted "core earnings" loss that excludes certain pension expenses and is closely watched by the market came in better than expected, helping to lift Boeing shares 1.9% at $137.88 in midday trading.

The results were the second consecutive quarter weighed down by the jumbo jetliner and the tanker program. Boeing last posted a quarterly loss in 2009 after hefty pretax charges.

On Wednesday, the company revised its annual earnings per share guidance to $6.40 to $6.60, from a range of $8.45 to $8.65 per share. It left its closely watched cash flow guidance unchanged at roughly $10 billion.

As older development programs continue to weigh on its finances, Boeing's aerial tanker, its biggest defense program, is more than 40% past its original budget.

Boeing added $243 million to its development bill in the first quarter in an effort to keep the program on schedule, only to add $573 million more with new delays with its most recent charge. The company announced in May first deliveries to the U.S. Air Force were stalled by five months due to design and production issues.

Boeing last week completed early aerial trials refueling aircraft from the U.S. Air Force, Navy and Marines, clearing the way for a purchase decision in August by the Department of Defense. The company still faces a battery of tests to complete the tanker over the next year.

Despite the losses, the company continued to spend $2.7 billion on share buybacks and quarterly dividends during the quarter. Some analysts caution that its rampant share buybacks aren't adequately budgeting for future development woes, a market downturn or committing to an all-new jetliner.

The aerospace giant is nearing important points in programs that make up the overwhelming majority of the company's commercial profitability. Boeing said it would introduce next year an updated model of its best-selling single-aisle 737 Max jet and begin production of its long-range 777X jetliner to airlines. The latter plane would hold 350 to 400 seats.

Before this happens, Boeing must ensure it can continue production largely unabated. Sales of large twin-aisle jetliners have sagged over the past year, with both Boeing and Airbus adding just a handful of new orders for big jets.

--Joshua Jamerson contributed to this article

Write to Jon Ostrower at jon.ostrower@wsj.com

(END) Dow Jones Newswires

July 27, 2016 13:10 ET (17:10 GMT)

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