Boeing Stock Tumbles on First-Quarter Results
Boeing Co. said Monday that first-quarter profit more than doubled and sales rose 70% as it ramped up airplane production, but the results disappointed Wall Street and the company’s stock tumbled.
Boeing said it earned $313 million, or 87 cents a share, in the quarter, excluding an accounting credit, compared with $119 million, or 35 cents a share, a year earlier. Revenue soared to $7.32 billion from $4.29 billion.
But Boeing’s net income was 13% below the Wall Street consensus of $1 a share, according to First Call, and its stock fell $6.625 to close at $95.375 on the New York Stock Exchange.
“The stock is down because earnings came in quite a bit below the consensus. That’s it in a nutshell,” said Peter Jacobs, an analyst at Ragen MacKenzie in Seattle.
Analysts said Boeing’s earnings were hurt by higher-than-expected expenses for new airplane models and other projects, including a commercial space venture.
The company also said it was incurring significant overtime costs as it increases production to meet rising demand and warned that profit margins would be under pressure for the rest of the year.
Boeing said profit margins would be lower for the rest of the year because of a shift toward deliveries of the new 777 and next-generation 737 models. New models carry lower profit margins until the company has written down the costs of production equipment.
At the annual shareholders meeting, Chairman Phil Condit said the two new models would account for half of Boeing’s production next year, but he said the industry’s fundamentals remained strong.
“I’m very optimistic about the upturn in our commercial airplane business as well as our prospects in defense and space,” Condit said. “We’re excited about the future of this company.”
Boeing delivered 68 commercial aircraft in the quarter, up from 40 in the year-earlier period when production was still hampered by the effects of a 10-week strike.
For this year, Boeing reiterated that it expects to deliver 340 jets and generate revenue of $33 billion, compared with 218 jets and revenue of $22.7 billion last year.
That includes the former defense and space operations of Rockwell International Corp., absorbed in December, but not the planned acquisition of McDonnell Douglas Corp., which Boeing executives say will be completed in August, adding about $15 billion of annual revenue.
Analysts expect Boeing production to continue rising in 1998 to about 450 jets as the world’s biggest commercial plane maker works to meet surging industry demand.
At the shareholders meeting, Condit reiterated that he was optimistic Boeing would complete its planned merger with McDonnell Douglas despite concerns raised by European Union authorities. A special meeting of Boeing shareholders to approve the merger has been set for July 25.
