Optimism over future plane orders buoys Boeing’s shares
Propelled by soaring passenger jet orders, Boeing Co. said Wednesday that it earned more than $1 billion in profit in the second quarter and predicted that the commercial aircraft boom could last into the next decade.
The rosy outlook came as the world’s largest aerospace company reported earnings that beat analysts’ expectations by a wide margin and sent Boeing shares up $3.43, or 3.3%, to a record $107.23.
“When you come in with earnings that are 15% higher than the consensus estimate, your stock price is going to go up,” said Paul H. Nisbet, analyst for JSA Research Inc. “It was a very good quarter.”
Wall Street also was emboldened by prospects that the demand for commercial aircraft was unlikely to wane anytime soon.
In a conference call with analysts, Boeing Chairman James McNerney said the company could book orders for more than 1,000 planes this year, marking an unprecedented third consecutive time it has sold so many aircraft.
Between 1999 and 2004, Boeing averaged about 300 orders a year. The company’s jetliners cost $50 million to $300 million, depending on the model and configuration.
McNerney also said U.S. airlines recovering from the aftermath of the Sept. 11, 2001, terrorist attacks were likely to begin ordering again, helping sustain the boom that began two years ago. So far most of the demand has come from carriers in Asia and the Middle East.
“Momentum is stronger than expected,” McNerney said, adding that demand “looks strong” over the next few years. “I think we’re on the front end of the order cycle.”
The possibility of an extended boom lifted prospects for 6,000 suppliers in California whose fortunes are inextricably linked to Chicago-based Boeing’s ability to sell planes. Since the boom began in 2005, some suppliers in Southern California have seen revenue climb 20% annually.
Nisbet said that even if demand began declining, Boeing had already racked up enough orders to keep factories humming for at least six more years.
“But they’re still getting orders at a faster rate than they are producing, so they’re in a very good position,” Nisbet said.
For the second quarter, Boeing’s net income was $1.05 billion. That was in contrast to a loss of $160 million in the year-earlier period, when the company took charges of $1.07 billion for delays on a foreign military contract and for costs to settle a Justice Department probe related to a Pentagon procurement scandal.
Commercial aircraft sales in the quarter rose 22% to $8.71 billion as the company delivered 17 more planes than a year earlier.
Boeing said it was pumping more money into research and development costs to keep delivery of the first 787 Dreamliner on track but this was unlikely to damp second-half earnings. Boeing has sold nearly 700 of the fuel-efficient planes even though they won’t begin flying passengers until next May.
Boeing’s defense business, which typically generates more than half of its revenue, had sales of $7.99 billion, up 3%. A surge in Pentagon contracts fueled Boeing’s defense business in the aftermath of the 2001 terrorist attacks but has since slowed.
Boeing has a large presence in Southern California with about 31,000 employees, most of whom work on defense-related contracts.
