From revenues to profits

Earlier this year, Boeing adopted new, aggressive company-level financial targets in revenue growth, net margins, operating cash flow and return on net assets. These targets, known as Enterprise Financial Targets, are aimed at taking business performance to a new level and driving sustained value creation through balanced financial management.

This is the first in a series of four articles that examine the targets and explain how employees can use them to drive performance. Darcel Stewart, director of financial planning and analysis at World Headquarters, recently talked to Boeing Frontiers about net margins.

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Main biz units raised margins in 1st quarter

Analysts generally lauded the margins recorded by Boeing's main business units in the first quarter of 2005.

Boeing said last month its operating margin for the quarter was 5.3 percent. That's down 1.1 percentage points from the year-before period. However, margins at Integrated Defense Systems climbed to 11.2 percent, up 1.2 points from the year-before period. And Commercial Airplanes recorded margins of 7.7 percent, an increase of 1.1 points from the first quarter of 2004.

"I think people will be pleased with the margins in the two main operating segments," said J.B. Groh, an analyst at D.A. Davidson, in a Reuters report.

The company attributed the drop in its overall operating margin to "significantly higher non-cash expenses for share-based plans, deferred compensation and pensions."

"At first glance things looked a little messy" because of one-time adjustments, said Fitch Ratings aerospace analyst Craig Fraser in an Associated Press report. "But when you look past that stuff, the quarter was very solid."