Boeing Earnings Call INSIGHTS: Balance Plans, 737 Gross Margin

On Wednesday, Boeing Co (NYSE:BA) reported its second quarter earnings and discussed the following topics in its earnings conference call. Take a look.

Balance Plans

Robert Spingarn – Credit Suisse Securities: This question is for either both of you. You provided a nice guidance boost and it is more than we expected at the second quarter, but as Greg just noted, there are still risks in the second half which in part seems evident by your 9% BCA margin target. The question is what are you continuing to protect for in the current guidance for H2 in both businesses and specifically how does the introduction of the MAX into the 737 program pool factor it?

A Closer Look: Boeing Co. Earnings Cheat Sheet>>

Greg Smith – EVP and CFO: Rob, MAX is in the guidance that you’ll see and we are expecting to introduce that into the block probably sometime in the third quarter. But when you look at the balance of the year there is certainly – you were provisioning for some risk there and with regards to rate ramp up that we have planned for the balance of the year I think we got good plans in place and I think we’ll execute that to plan but we are making sure that we are getting everything in order and having the appropriate diligence put into that. We are making some investment in productivity and tools in the back half of the year and obviously state taxes increased slightly as we think through the – look at the delivery profiles through the balance and as I said, you know, the pricing provisioning for the MAX is already in the guidance that we provided, but that’s essentially.

Robert Spingarn – Credit Suisse Securities: Anything on the defense side?

W. James McNerney, Jr. – Chairman, President and CEO: No.

737 Gross Margin

Joseph Nadol III – JPMorgan Securities: Want to dig a little bit more into that 737 block situation, you are not only going to be adding MAXs, but I believe some current NG aircraft that are probably facing some pricing pressure out there in the competitive market. You have 2,000 and change aircraft in the block right now you probably add I don’t know 500 to 600 something like that, Greg. Could you maybe quantify how much pressure we might expect on the 737 gross margin, any kind of context?

Greg Smith – EVP and CFO: Joe, as I said, it’s in our guidance. We’re certainly just like I talked about before, anytime you introduce the new airplane there is certainly some introductory pricing with new customers. We’ve got learning curve, obviously, on the new airplane and we are working that. We are working productivity across the board to try to offset any of that and I think we’ve covered that appropriately in the balance half of the guidance we provided. So, I think, we got it well understood and we’re going after it. So, I’m not concerned about it as some of the folks, that I’ve seen published on this topic are?

Joseph Nadol III – JPMorgan Securities: Is the bigger issue the MAX or is it the pricing on the remaining NGs?

Greg Smith – EVP and CFO: I think it’s just – as I said it is any time you’re ramping down a program and then ramping up a new one, certainly there is pricing consideration taken in that. Customer-by-customer it’s different, but again, I think we know where it is, we are working through our production system, we are working through our supply chain and again I think we got good plans in place to address it.