Shares of Boeing (NYSE:BA) were trading up to 2% higher this morning despite announcing that its earnings dropped 33% in the second quarter compared to a year ago due to costs associated with the development of its new military refueling aircraft.
Earnings were US$ 1.11 billion or $ 1.59 per share against 1.65 billion, or US$2.24 per share in the second quarter of 2014.
But, revenues are better than expected thanks to continued strong demand for passenger aircraft, thanks to lower fuel prices. Boeing delivered 197 airliners, 9% more than in Q2 2014, and revenue increased 11% to reach US$24.5 billion.
Boeing's profits were affected by an after-tax charge of US$536 million for the second quarter, related to problems that emerged during testing of the fuel system its KC-46 refueling aircraft KC-46 for the US Air Force.
This is the second charge levied against this aircraft, which is one of its biggest ever contracts for the US military, bringing the total pre-tax expenses for the project to nearly US$1.3 billion before tax.
Boeing is now best known for its wide range of civilian aircraft, but it also has considerable and historic involvement in the defense sector and their respective performance often varies.
Meanwhile, Boeing is trying to reduce production costs for its 787 Dreamliner and accelerate their production line to improve profitability and ease investor fears about cash flow.
"Overall, our forecast for the second half of the year remains positive," however, said Boeing’s new CEO Dennis Muilenburg. And so it should, given that today, Boeing receive a record order for 50 new Boeing 767F freighters worth US$10 billion at list prices.