Boeing Co cut production of its flagship Dreamliner and delayed the arrival of a successor to its 777 mini-jumbo, piling new pressures on a rejigged senior management team on Wednesday as the continued safety grounding of its 737 MAX sliced third quarter profits.
The world’s largest planemaker also said it was delaying plans to step up production on its money-spinning 737 line in the Seattle area, and would not hit a record-level 57 aircraft monthly until late 2020, months later than previously planned.
Despite the trio of industrial setbacks, Boeing shares were up 2.6% in morning trading as its steady estimate of a 737 MAX return in the fourth quarter appeared to be eclipsing the downside of the 787 production cut and other problems, an analyst said.
“The 787 cut appears to be mostly tied to China trade negotiations, which at least have the potential to improve over the next 12-months,” said Seaport Global analyst Josh Sullivan.
The profit slump and fresh setbacks capped a tumultuous week for the world’s largest planemaker, already in the eighth month of a deepening crisis over the grounding of its best-selling single-aisle following deadly crashes.
On Tuesday, the company ousted the top executive of its crucial commercial airplanes division, Kevin McAllister, in an unexpected management shakeup related to the MAX crisis that senior industry sources say puts chief executive Dennis Muilenburg squarely in the firing line in the event of further revelations or if the company fails to recover from the MAX crisis.
Muilenburg’s title of board chairman was stripped earlier this month.
Muilenburg told analysts on a conference call that Boeing may consider cutting or halting 737 production if return-to-service assumptions change.
Muilenburg also expressed regret over instant messages, first published by Reuters on Friday, in which a former Boeing pilot describes erratic simulator behaviour of software now linked to both crashes.
Boeing also said there was “no significant change” to estimated payments to airline customers related to the 737 MAX grounding, part of the $8bn price tag Boeing has estimated for the MAX crisis.
Yesterday, the US manufacturer reported a 53% drop in quarterly profit and had a negative free cash flow of $2.89bn in the quarter, compared with a positive free cash flow of $4.10bn a year earlier.
Core operating earnings fell to $895mn or $1.45 per share, from $1.89bn or $3.58 per share, a year earlier. After the 737 MAX safety ban in March, Boeing cut 737 monthly production from 52 aircraft to 42 and halted deliveries, cutting off a key source of cash and hitting margins.
Eli Lilly
Eli Lilly and Co third-quarter sales missed Wall Street estimates yesterday as rebates limited revenue from its top-selling diabetes drug Trulicity, and its shares fell about 4%.
The Indianapolis-based drugmaker has been banking on newer drugs such as Trulicity and psoriasis therapy Taltz as it faces competition from cheap generic versions of erectile dysfunction treatment Cialis and other older medicines.
Demand for Trulicity remained strong in the third quarter, but profits were crimped by high rebates or discounts that drugmakers pay to middlemen such as pharmacy benefit managers in order to make sure patients have access to their products.
Trulicity sales rose 24% to $1.01bn, short of Wall Street expectations of $1.08bn, according to Refinitiv data.
It had a net price decline of about 5% during the quarter.
Overall revenue rose 3.2% to $5.48bn, just shy of expectation of $5.50bn.
However, the company raised its 2019 adjusted earnings forecast to $5.75 to $5.85 per share, from the prior range of $5.67 to $5.77 after reporting higher-than-expected adjusted earnings.
Lilly reported adjusted profit for the quarter of $1.48 per share, beating Wall Street estimates by 7 cents, helped by a lower tax bill.
Freeport McMoRan
Freeport McMoRan Inc posted a third-quarter loss yesterday in line with expectations due to lower copper production at its Peruvian and Indonesian mines and a drop in prices for the red metal.
The company has been shifting to underground mining from an open pit at its giant Grasberg mine in Indonesia and had previously warned that production would take a hit.[
The drawn out Sino-US trade war and fears of slowing global growth have forced some of the biggest copper consumers, including China, to curb their appetite for the metal, pushing down prices.
“Copper markets today are clearly affected by the trade war,” Freeport chief executive Richard Adkerson said on a Wednesday conference call with investors.
The company reported a net loss of $131mn, or 9 cents per share, compared with a profit of $556mn, or 38 cents per share, a year earlier.
Excluding items, the company posted a loss of 1 cent per share, in line with estimates, according to IBES data from Refinitiv.
General Dynamics
Gulfstream jet deliveries helped General Dynamics Corp report a 7.3% rise in quarterly profit yesterday, but shares fell as much as 4% after company officials said the fourth quarter would see more deliveries of less-profitable refurbished aircraft.
“Based on the inputs we’re seeing right now and the contracts that will deliver in the fourth quarter, we would expect to see, at this point, more pre-owned aircraft in sales in the fourth quarter,” chief financial officer Jason Aiken told investors on a conference call, with margins on pre-owned aircraft not being as profitable as those for new jets.
Revenue in the aerospace unit jumped 23% to $2.5bn in the third quarter ended September 29, as new Gulfstream deliveries, a key metric for investors, increased to 38, from 27 a year earlier.
Net earnings climbed to $913mn, or $3.14 per share, in the quarter, from $851mn, or $2.85 per share, a year earlier.
Wall Street analysts estimated earnings per share of $3.06, according to Refinitiv data.
Revenue rose 7.3% to $9.76bn.
LG Display
South Korea’s LG Display Co Ltd will chop its spending by 500bn won ($427mn) and revamp its older LCD TV production lines after falling to a third-quarter loss, it said on Wednesday.
Hurt by lower liquid crystal display (LCD) panel prices, the Apple Inc supplier has replaced long-time CEO Han Sang-beom and started a voluntary redundancy program as part of a cost-cutting drive.
LG Display posted of 437bn won ($373mn) for the three months to September 30, worse than the 322bn loss expected by analysts and following a profit of 140bn a year earlier.
Revenue fell 5% to 5.8tn won, the company said in a stock exchange filing.
LG Display, which has posted three consecutive losing quarters, is going through “structural reforms at zero base”, chief financial officer Suh Dong-hee said on an earnings call.
It will cut capital spending to 7.5tn won from a planned 8tn, LG said.
Caterpillar
Industrial bellwether Caterpillar Inc fell short of Wall Street estimates for quarterly profit yesterday and cut its forecast for overall earnings in 2019, as it reported a 13% slide in Asia sales driven by weakening demand in China.
The results, the latest hint of the deepening fallout for companies of US-China trade tensions and a broader slowdown in the world’s second-largest economy, sent shares in the heavy machinery maker down 5% and underpinned a fall in Dow Jones Industrial futures.
Caterpillar said the slump in Asia was led by a 29% plunge in construction equipment sales and that it was struggling against growing local competition and the broader economic slowdown as well as retailers slashing inventory.
“Dealer inventories rose by about $800mn in the third-quarter last year as we were ramping up production to meet demand. Now as we see the end-markets slow, we are reducing the dealer inventories by $400mn in the quarter,” chief financial officer Andrew Bonfie said.
Chief executive officer Jim Umpleby said demand in the fourth quarter is expected to be flat.
Total sales and revenue for the third quarter ended September 30 fell 5.6% to $12.76bn.
Caterpillar said the impact of tariffs imposed on its goods as a result of US President Donald Trump’s trade war with Beijing would now be lower than the $250mn to $350mn range it gave earlier this year.
But it also cut its 2019 expectations for profit to between $10.90 and $11.40 per share, compared with a previous estimate of $12.06 to $13.06.
Profit attributable to common stockholders fell to $1.49bn, or $2.66 per share, in the three months ended September 30 from $1.73bn, or $2.88 per share, a year earlier.
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