What Drives Boeing's Massive $440 Billion Backlog?

Boeing 737-900ER. Photo: Boeing

Boeing (NYSE: BA  ) reported its first-quarter 2014 earnings results on Wednesday. The bad news is that Boeing's defense, space, and security unit reported a first-quarter total revenue decline of 6% compared to the same time last year. The good news is that Boeing's commercial airplanes unit reported a revenue increase of 19%, and a significant backlog of $374 billion -- again, that's just for commercial airplanes. Here's what else you need to know. 

Bring on the billions
When it comes to defense contractors, Boeing is one of the biggest in the world. However, its defense segment pales in comparison to its commercial airplane unit. For example, Boeing's total backlog at quarter-end was $440 billion, but only $66 billion came from defense. Yes, $66 billion is a significant number -- especially when you consider that the top defense contractor in 2013 by defense profits, Lockheed Martin (NYSE: LMT  ) reported an order backlog of $79.6 billion as of March 30 -- but it's nowhere near the size of Boeing's commercial airline backlog.

As such, when looking at Boeing's future, the primary thing to watch is Boeing's commercial airplane segment.

Boeing's commercial airplanes unit

Depicted here is a Boeing 737-800 in Air Lease Corporation livery. Photo: Boeing.

In its Q1 report, Boeing's commercial airplanes segment reported over $12.7 billion in revenue, as well as an increase to its operating margin of 0.4 points, bringing it up to 11.8%. However, the thing that's most impressive is Boeing's commercial airplane deliveries. For its first quarter, it delivered 161 planes, which is an increase of 18% compared to the same time last year.

Further, in its first-quarter report, Boeing states; "During the quarter, the 787 program reached a 10 per month production rate and completed preliminary design review on the 787-10. ... In April, the 737 program reached a production rate of 42 per month." Considering the 737 is Boeing's most popular plane when it comes to orders, a production rate of 42 per month is great news.

This is important because while a backlog of $374 billion for commercial airplanes is great, it means little if Boeing can't deliver them. Consequently, Boeing's increase in deliveries is good news for investors.

What to watch going forward
Boeing's first-quarter 2014 earnings report is welcome news for investors. In addition to the increase to deliveries, Boeing raised its core earnings per share guidance for 2014 to between $7.15 and $7.35, up from $7.00-$7.20. Further, overall revenue increased 8% despite a loss in defense revenue, operating cash flow increased to $1.1 billion, and Boeing reported $19 billion in net orders during the quarter. Plus, with a backlog of $440 billion, Boeing's future looks solid. However, investors would do well to continue monitoring Boeing's deliveries. Right now, deliveries are going well, and providing Boeing with significant profits. But, that's not a guarantee that deliveries will continue to go smoothly. So, while there's not cause to worry right now, it's still something investors should keep an eye on.

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Comments from our Foolish Readers

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  • Report this Comment On April 27, 2014, at 11:37 AM, rajak223 wrote:

    The missing Boeing and the remote controlled Boeings=Hegelian Dialectic Quantum Financing for Royalty.

    The only true definition of the word "Fool" I'm afraid is.

    "a professional jester, formerly kept by a person of royal or noble rank for amusement: the court fool".

    Last question for the masses or better yet royalty's entertainment-

    How does it feel to be tricked or do you even realize you are tricked?

  • Report this Comment On April 27, 2014, at 5:16 PM, rotorhead1871 wrote:

    great products!! the customer what they want....supporting those products around the world 24x7x365.......that is the recipe of the Boeing success story..

    747, 787 777, 757, 767, 737, 727, 707, 717, BOEING has the solution.......and the world knows it!

  • Report this Comment On April 27, 2014, at 6:27 PM, dsaundi46 wrote:

    The Reason They Have Such a Back Log is Because They Contract Out To the Lowest Bidder, Some Highly Technical Jobs and Assemblies !

    I Used to Fix Some of their Design Flaws for their Aircraft Owners (People who Didn't even Like Me Called Me a Mechanical Genius)

    I went to Seattle at Boeing Flight Test in 1996 on a Subcontract that the Company I worked For had Underbid Boeing on a Simple Interior Modification...

    Boeing Employees Talked Shop with me and saw I was Sharp..

    They Offered me a Whole 18 Dollars an Hour and I checked the Cost of Living Difference...

    It Was like offering me 12 Dollars an Hour in Texas.. LOL

    That is why they have such a Backlog..

    They Spend Billions of Dollars Yearly on Subcontractors Who Cannot Produce Serviceable Aircraft Parts and Assemblies...

    As for Myself and All the Amazing Guys I Learned From and Consulted With, We have Taken our Experience to Other Fields Where they are 3 Times More Valuable...

    So in other words our Pay is Three Times what it was in our Hardest Working and Most Technically Advanced Aviation Years...

    And its less hours and less work LOL !!! : )

  • Report this Comment On April 27, 2014, at 6:45 PM, awright69 wrote:

    Shoddy planes and tax breaks out the arse.... They paid less in taxes last year than I did. Fscking corporate America better wake up and start paying decent wages and fair share of taxes.... or there'll be no American market left to cater to.

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Katie Spence

Katie Spence has been a financial journalist for The Fool since 2011. She specializes in defense companies, “green" technology, autos, and robots. Follow her on Twitter for breaking news in the defense, auto, and robot industry.

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