Boeing: 4Q17 operating margins
In this section, we’ll consider Boeing’s (BA) operating margins. In 4Q17, Boeing’s revenue growth was 8.9% and its operating expenses jumped 5.9%. This trend indicates that the rate of revenue change was much higher than the change in operating expenses.
On a reported basis, Boeing’s operating income grew 38.8% to $3.0 billion from ~$2.2 billion in 4Q16. On a consolidated basis, the company’s operating margins expanded 260 basis points to 11.9% in 4Q17 from 9.4% in 4Q16.
Segmental operating margins
The operating income for Boeing’s Commercial Airplane segment rose 50.0% to ~$1.8 billion from ~$1.2 billion in 4Q16. The segment’s operating margin rose 320 basis points to 11.5% in 4Q17 from 8.3% in 4Q16.
Operating income in the Defense, Space & Security vertical rose 6.0% to $553.0 million from $523.0 million in 4Q16. The segment’s operating margin expanded slightly to 10% in 4Q17 from 9.9% in 4Q16.
Although the operating income for the Global Services division rose 9.0% to $617.0 million, its operating margin contracted 1.2%. From 16.6% in 4Q16, the segment’s margins fell to 15.4% in 4Q17.
Management outlook for 2018
In the Commercial Airplanes division, Boeing (BA) anticipates its operating margins to exceed 11.0% in 2018. In 2016, its operating margin was 9.4%. The higher operating margin guidance assumes increases in all planned production rates in 2018.
In the Defense, Space & Security segment, these margins are expected to be ~11.0% in fiscal 2018, up slightly from 10.7% in fiscal 2017. The company expects a marginal gain in the in fiscal 2018 operating margins of its Global Services division to 15.5% from 15.4% in fiscal 2017.
Investors interested in exposure to large-cap companies may consider the SPDR S&P 500 ETF (SPY). Major industrial companies such as Berkshire Hathaway (BRK.B), DowDuPont (DWDP), and 3M (MMM) comprise ~1.7%, 0.74%, and 0.62% of SPY’s portfolio, respectively. This ETF has a 0.84% weight on Boeing in its portfolio.