Wall St. Ignores Boeing Profit Slip
Boeing Co.’s first-quarter profit fell 14% -- in part because of an accounting change -- but it beat Wall Street’s expectations.
The company’s stock hit a four-year high because of several major jet orders and a continued uptick in Pentagon spending.
The aerospace giant earned $535 million, or 66 cents a share, down from $623 million, or 77 cents, a year earlier. Revenue rose slightly to $12.99 billion from $12.9 billion.
“At first glance things looked a little messy because of some of the one-time items,” said Craig Fraser, an analyst with Fitch Ratings. “But when you look past that stuff, the quarter was very solid.”
Boeing reiterated its expectation that earnings would be between $2.40 and $2.60 a share this year, and $3 to $3.20 a share next year.
On Wednesday, shares of the Chicago-based company reached $60.10 -- their highest level since 2001 -- before closing at $59.66, up 66 cents, on the New York Stock Exchange. The stock has risen 37% in the last year.
Boeing’s commercial aircraft unit, in a slump since the 2001 terrorist attacks, appears to be getting back on its feet, said interim Chief Executive James Bell. The aircraft market is in a “gradual recovery” and the outlook is bright, he said.
But the biggest battle may be yet to come. European rival Airbus, which in 2003 surpassed Boeing as the world’s largest maker of commercial airliners, made aviation history Wednesday with the first flight of its A380 super-jumbo jet, a double-decked 555-passenger aircraft weighing nearly 1 million pounds.
For its part, Boeing received a flurry of orders in the last few days for its new plane, the 787 Dreamliner, which is expected to enter service with airlines in 2008.
On Tuesday, Air India Ltd. agreed to buy 35 long-range Boeing planes including 20 787s in a deal valued at about $6 billion. The 250-passenger jet calls for a dramatic change in aircraft design, with a composite wing and fuselage that is supposed to be 10% more fuel efficient than existing jets.
Air India’s order came the day after ACE Aviation Holdings Inc.’s Air Canada unit placed a firm order for 32 Boeing jets. In the last month Boeing also received major orders from Northwest Airlines Corp. and Korean Airlines.
All told, Boeing expects to deliver 320 planes this year and 375 to 385 in 2006.
“We are very pleased with the unprecedented response” to the 787 aircraft, Bell said.
Last month Bell was named CEO to replace Harry Stonecipher, who was forced to resign after acknowledging having an affair with a female Boeing executive. Bell, who remains chief financial officer, said the directors were looking for a permanent CEO “in a deliberate fashion” but didn’t know how long the process would take.
The drop in Boeing’s quarterly profit primarily reflected higher performance-based stock compensation expenses, which grew by $126 million, or 10 cents a share, as its stock price rose about 13% in the quarter. Under the compensation plan employees can defer receiving stock granted to them but Boeing must reflect the higher value of the shares on its books.
Excluding the costs from some asset sales and the increases in compensation expenses, Boeing said it would have earned 64 cents a share in the first quarter. On that basis, analysts expected Boeing to earn about 55 cents a share.
Boeing is the largest private employer in Southern California with about 35,000 workers, most of whom work in the company’s defense unit.
Quarterly sales at the defense unit, which accounted for more than half of total revenue last year, grew 2% to $7.54 billion, helped by its military computer and data network businesses. Operating profit -- or earnings before taxes -- rose 15% to $847 million at the defense unit.
The biggest jump came from the defense unit’s Network Systems business, whose operating margin climbed to 20% as the Army ramped up work on its $21-billion Future Combat Systems program. Boeing is overseeing the development of an array of manned and unmanned aerial and ground vehicles that would be connected by an Internet-like communications system.
Gains at Network Systems were offset somewhat by a 22% drop in operating profit from Boeing’s aircraft and weapons systems, which delivered fewer fighter jets, cargo planes and bomb kits in the quarter.
Boeing’s rocket and satellite-making business also posted a gain after several quarters of losses as the Pentagon lifted an 18-month-old suspension. Boeing was barred from seeking any new military rocket contracts after two employees were found to have pilfered proprietary rocket documents from rival Lockheed Martin Co.
James Albaugh, president of Boeing’s defense unit, said its satellite-making business in El Segundo was also making progress fixing costly satellite glitches that hurt earnings, but “we haven’t turned the corner yet.”
Times wire services were used in compiling this report.
