Boeing said Wednesday it recorded a pre-tax charge of $418 million in additional costs on the KC-46 tanker, which after taking into account the tax benefit meant a $334 million decrease in cash flow.

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Boeing took another multimillion-dollar hit in the second quarter from additional cost overruns on the KC-46 Air Force aerial refueling tanker program.

The Commercial Airplanes part of the business continued to perform very well, as did the new services division, so that revenue and profit for the quarter were higher than expected.

Still, shares in the company fell after the earnings report.  Analysts had predicted an increase in projected profits and cash flow for the year, and when the company only maintained rather than raised the profit and cash outlook, shares fell about $9, or 2.5 percent, in mid-morning trading.

Boeing said Wednesday it recorded a pre-tax charge of $418 million in additional costs on the KC-46 tanker, which after taking into account the tax benefit meant a $334 million decrease in cash flow.

That’s on top of $3 billion in previous tanker charges over the past three years, according to company filings.

Boeing chairman and chief executive Dennis Muilenburg said the latest hit was due to the higher than estimated costs of incorporating modifications into the six flight test tankers and two early-build tankers, as well as additional costs from the late-stage testing and certification process.

In a note to clients, Rob Stallard, a financial analyst with Vertical Research Partners, wrote that while investors have generally shrugged off prior tanker charges, this time the impact of Boeing failing to raise its earnings and cash forecast as expected was negative for the stock price.

“The KC-46 has returned to again haunt Boeing’s results,” Stallard wrote. “Management has previously expressed confidence that there would be no more tanker charges, and yet they keep coming.”

On a morning teleconference, Muilenburg tried yet again to draw a line under the tanker cost overruns and offered assurance that no more charges are likely.

With all the flight tests needed for certification now finished, he said, the final configuration of the flight test and early build planes is now fully defined with no further modifications expected.

“The plan to complete manufacturing of these eight aircraft is now clear and firmed up,” Muilenburg said. “We now have a very clear line of sight … crystal clarity on what is left to build out these aircraft.”

Boeing is due to deliver the first tanker to the Air Force in October, he said.

Leanne Caret, head of Boeing’s defense and space division, said in May that the jet maker will deliver the contractually required first 18 tankers to the Air Force no later than the end of this year. However, it’s likely the Air Force will not have the trained personnel needed to take the tankers at such a rapid clip after first delivery, so that target for completing 18 deliveries could slip into early next year.

Boeing also recorded a separate non-cash, pre-tax charge of $148 million in the quarter that was previously announced to account for a legal ruling against Boeing in connection with its claims against Spirit AeroSystems related to the 2005 sale of its Wichita, Kan., aircraft parts business to Spirit.

Revenue for the quarter rose 5 percent to $24.3 billion. The commercial airplane division contributed $14.5 billion, the defense and space unit contributed $5.6 billion and the services division $4.1 billion.

Net profit for the quarter rose 26 percent to $2.2 billion, or $3.73 per share, an overall operating margin of 11.2 percent.

The new lower federal tax rate gave Boeing a substantial boost. Its effective tax rate for the quarter fell to 15.1 percent from 29 percent a year earlier.

Despite the share price hit from the tanker charge, Stallard maintained his ‘Buy’ recommendation on Boeing stock. He said the share price in the months ahead will be dependent on Boeing generating cash flow, which he sees as still robust.

“As long as the company can keep executing on (commercial airplane) development and production programs, and the aerospace cycle does not roll-over, then we think Boeing’s free cashflow yield … is likely to remain the key attraction,” he wrote. “Even in the face of increased trade war rhetoric, the stock has proved to be pretty resilient.”

Overall, Muilenburg gave a glowing report of Boeing’s long-term business prospects because the commercial airplane market continues to grow in size and geographical diversity as the middle classes in emerging countries enlarge and drive air travel demand.

When he was asked about the lack of new Boeing airplane orders from China this year, Muilenburg expressed no concern, but did restate the importance of the Chinese market to Boeing and gave a strong statement on how vital free trade is to his business.

About one third of the 737s built in Renton go to airlines in China, which within the next decade is expected to overtake the U.S. as the largest domestic aviation market in the world.

However, this year, after President Donald Trump loudly denounced the imbalance of China/U.S. trade trade and begun to impose tariffs, China retaliated with its own tariffs.

And Chinese airlines have made no new orders for Boeing jets this year, while still ordering Airbus jets. With no explicit ban on buying U.S. planes announced, industry observers see this as a strategic pause for political reasons rather than a hard stop on Boeing purchases.

Muilenburg said 737 production in Renton has just ramped up from 47 to 52 jets per month on the back of strong demand from China, and is set to rise again to 57 per month next year.

“That’s growing U.S. manufacturing jobs,” Muilenburg said. “It’s very clear to us that a free and open trade environment and good relations between China and the U.S. …. is beneficial to the economies and jobs of both countries,”

He said the forthcoming 777X, with the first flight test planes now being built in Everett, is “a healthy development program on track.”

And because the company booked substantial additional sales of the 787 Dreamliner this year, it increased by 100 the number of aircraft across which it will spread the production costs to 1,500 Dreamliners.

With just over 700 Dreamliners delivered at the end of the second quarter, Boeing still must recoup $24.2 billion in deferred production costs from the remaining 800 in the accounting block, plus an additional $2.9 billion in additional tooling and other non-recurring costs.