Here’s the Big Mystery About Boeing’s Second Biggest Business

As an investor (and a financial writer), I invest and write about Boeing (BA 0.89%) stocking up on for the better part of the last two decades. And I have to tell you – there is one thing that has always bothered me about Boeing: the space business.

Think about it. Boeing has been involved in space exploration since the 1960s. Boeing helped get the Apollo program off the ground — and to the moon. Boeing led the effort to build the International Space Station in the 1990s.

Now, Boeing’s blazing new trails with a leading role in Project Artemis (to get humanity return to the moon after a 50-year absence), built a new spacecraft to shuttle astronauts to the ISS and back and keep them stocked with toothpaste and Tang (and other supplies). Even Boeing is part of a consortium of companies working to build a private space station change the International Space Station when it goes out of business by 2030.

And yet, as investors we know almost nothing about Boeing’s second largest business.

Here’s how Boeing breaks down its revenue by segment from three major (and two minor) business segments:

See that section titled “Defense, Space and Security”? Boeing’s entire space program is tucked away somewhere within that entry, often abbreviated “BDS.” However, Boeing has given its investors almost no insight into exactly how the space program will function within BDS.

Boeing’s biggest black box

What do we know about Boeing’s space business or is it part of a business segment — BDS — that generated $6.2 billion in revenue last quarter, and $23.2 billion in all in 2022, according to data from S&P Global Market Intelligence. We know that this business has been moderately profitable for Boeing in the past, averaging an operating profit margin of 7.5% from 2017 to 2021, but it became less profitable in 2022, losing $3.5 billionand write off all profits earned in the previous two years.

What we don’t know about Boeing’s space business is exactly how big a part it plays within BDS. As a result, we don’t know — and can only really guess — how big a role Boeing’s space program played in the losses. And we don’t know how much of a role “space” played in Boeing’s decision to sell, retain, or even expand its stake in the United Launch Alliance (ULA) space joint venture with Lockheed Martin (LMT -0.21%) later this year.

As reported by Ars Technica earlier this month, ULA is being sold, and it is a real possibility that this sale will take the form of Boeing buying Lockheed’s 50% stake in the joint venture. Or buy Lockheed Boeingthe stake. Or someone will buy it BOTH Boeings and Lockheed Martin’s interests in ULA!

Boeing has a big decision to make

What does this mean for Boeing, and how will Boeing management decide whether to keep ULA, sell ULA, or buy more ULA than before?

It’s hard to say, because the sad truth is that Boeing has told investors very little about ULA – or space in general – and how important these businesses are to the overall segment titled ” BDS.” Of course, from the company’s 10-K, we know things aren’t going well:

• All in all BDS sees its revenue fall 12.5% ​​between 2021 and 2022 (or decrease 11.5% between 2020 and 2022).
• Delivering military planes – likely a big part of BDS business, although Boeing won’t say how big — doesn’t make big moves. With 154 military aircraft delivered in 2020, 169 in 2021, and 160 in 2022, Boeing’s defense business seems to be moving forward, but there is no clear trend.

We can guess that Boeing’s space business is not the same. According to management, the value of Boeing’s “equity investment” in ULA will decrease by 5% between 2021 and 2022 to $587 million. And Boeing’s Commercial Crew program — the Starliner spacecraft built by Boeing, and intended to be used to fly astronauts and supplies to the ISS — recorded a $288 million “reach-forward loss” in 2022.

But the simple truth is that as much as Boeing has told us about its business, and its business segments, it’s not enough. It’s not enough to help us decide whether Boeing Space is a business worth keeping. And it’s not enough to tell us — when Boeing finally decides what to do with its stake in ULA — whether that decision is good or bad.

A modest proposal for Boeing

Investors deserve more disclosure from Boeing. And if you’re listening, Boeing management, I have just four words of advice:

Do better. Reveal more.