Boeing Lifts Outlook as Profit Soars
Lifted by surging sales of commercial aircraft, Boeing Co. said Wednesday that its fourth-quarter earnings more than doubled and the aerospace giant boosted its 2006 profit forecast.
The company also offered a rosy outlook for aircraft deliveries in 2007 as it tries to regain the top spot in commercial aviation from Europe’s Airbus. Shares of Boeing closed near an all-time high, jumping 5% on the news.
Chicago-based Boeing reported fourth-quarter net income of $460 million, or 58 cents a share, compared with $186 million, or 23 cents, in the year-earlier period. Revenue increased 7% to $14.2 billion.
The results easily beat Wall Street estimates and Boeing shares rose $3.31 to $71.62. The company has 31,000 workers in Southern California and is the largest private employer in the region.
Last year, Boeing posted a record 1,002 orders for commercial jetliners, more than triple that of 2004, as European and Asian airlines bought aircraft after a long industry slump.
Boeing booked 291 orders for its fuel-efficient, mid-size 787 Dreamliner, which is due out in 2008. It also enjoyed strong demand for its smaller 737.
Airbus also had a record year in aircraft sales, narrowly edging Boeing in total orders, although Boeing booked 70% of the global orders for larger, higher-priced jetliners.
In late December, Boeing’s stock reached a record $72.40, and then its shares retreated as investors worried that the company might be unable to maintain the momentum in airplane sales.
The fourth-quarter results and an upbeat forecast appear to have dispelled those concerns, analysts said. “Investors are pleased with these numbers,” said Cai Von Rumohr, an analyst with SG Cowen & Co. “Profits were good, cash was great and the guidance was good.”
Boeing raised its 2006 earnings estimates by 15 cents a share to a range of $3.25 to $3.45 on better operating performance and lower-than-expected tax payments in the current quarter.
Chief Executive James McNerney said in a call with analysts that Boeing didn’t expect to match last year’s record plane orders, but that strong sales of lucrative wide-body jets were likely to continue.
“There is a very promising momentum there,” he said. “We expect to see a pretty good order flow.”
Boeing expects to deliver 395 planes this year, up 36% from last year, and deliveries may rise an additional 13% in 2007, McNerney said.
The company’s commercial aircraft division posted a quarterly operating profit of $330 million, contrasted with a loss of $149 million in the year-earlier period, when it took a charge to close the 717 jetliner program in Long Beach. Sales rose 8% to $5.86 billion despite a monthlong strike by machinists that halted aircraft production in the Seattle area.
Boeing’s defense business also continued to show robust earnings despite concerns about a slowdown in Pentagon spending. The company’s Integrated Defense Systems unit posted quarterly operating earnings of $924 million, up 37% from $675 million a year earlier, as it delivered more C-17 cargo planes and F/A-18 fighters.
Military revenue increased 7% to $8.13 billion despite a troubled spy satellite program and a strike by 1,300 Boeing machinists that halted rocket launches in the quarter. (The machinists voted Wednesday to end the three-month-long strike).
The company’s Southland operations include a military and commercial satellite plant in El Segundo, a missile defense group in Anaheim and the C-17 production line in Long Beach. The C-17 plant will close in 2008 unless it receives additional orders for the four-engine jet.
Revenue growth in Boeing’s defense business is likely to slow to 2% to 5% a year as the Pentagon curtails spending, after rising about 10% annually during the last five years, said James Albaugh, president of Boeing’s defense operation.
Boeing has a backlog of $37.9 billion in military work, but he doesn’t see many new multibillion-dollar Pentagon contracts on the horizon. “It’s going to be a tough marketplace,” Albaugh said. To streamline operations and cut costs, Boeing announced last week that it would reduce its defense business units from seven to three.
Because of the recent run-up in military spending, however, Boeing’s defense business in 2003 surpassed its commercial aircraft unit and currently accounts for 60% of the company’s revenue. McNerney expects that figure to even out soon.
“I want them each to run scared and compete with each other,” he said. “There will be a reasonable balance between those two businesses over time, and that’s good for us.”
