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Boeing net rises; cuts '08 sales view on 787 delay
Boeing said Wednesday earnings surged on heavy third-quarter demand for its commercial airplanes, driving full-year estimates higher, but it lowered its 2008 sales targets because of delays delivering its new 787.
The Chicago-based aircraft maker said it has pushed back 35 deliveries of the popular but still grounded passenger jet to 2009 from 2008, cutting into next-year sales forecasts by about $3.5 billion and cash flow goals even more, while raising its research and development expense targets by about $400 million.
Executives say they can meet their prior 2008 profit targets by trimming manufacturing costs and corporate payouts. But the views fall short of Wall Street's loftier sales and profit targets.
Boeing shares fell as much as 2% before closing 0.7% lower at $94.26. Shares in the Dow Jones Industrial Average component are up about 7% this year.
Saying he was "disappointed with this schedule change," and despite higher costs for its 787 launch, Boeing CEO Jim McNerney repeated that the rationale for the much-anticipated lightweight jet remains solid. Boeing's $100 billion order book for the 787 "makes the current business case for this airplane very compelling," in a conference call.
Commercial jets take off
Demand for commercial airplanes has fattened Boeing coffers for several quarters, and the company said that its customers' appetite has shown no sign of letting up. McNerney said this year's orders could match its tally last year, when the company topped the 1,000 mark for new orders.
"With the current momentum, it could happen," he said.
Boeing said net income for three months ended September rose 61% to $1.11 billion, or $1.44 a share, from $694 million, or 89 cents a share in the year earlier quarter.
Sales rose 12% to $16.5 billion.
"This was a strong quarter from Boeing," with commercial airplanes driving the better-than-forecast profits, said Banc of America Securities analyst Robert Stallard in a note to investors. Defense was "a mixed bag."
Commercial airplane sales rose 23% to $8.3 billion, as it delivered 109 aircraft, or 9% more than last year. Those deliveries reflect past success booking orders.
In terms of future sales, Boeing booked 354 orders in the commercial plane division, including 247 of its popular 737 jet and 73 of its yet to be released 787, according to its Web site. Continued demand lifted its backlog to $224 billion, 46% higher than last year.
Defense sales added 3% to $8 billion as it delivered 30 production aircraft and one satellite during the quarter.
Operating earnings in defense dropped after it took a $94 million charge from the Delta II launch program.
2008 outlook chipped by 787 delays
Higher sales, lower corporate costs and a lower tax rate are likely to result in better-than-forecast results for this year, Boeing said. The company raised its full-year 2007 earnings outlook to $5.05 to $5.15 a share from $4.80 to $4.95 a share. Better defense sales boosted its sales outlook by $1 billion to $66 billion.
For next year, however, the company cut its sales outlook to a range of $67.5 billion to $68.5 billion from $71 billion to $72 billion, while keeping its 2008 earnings forecast at a range $5.55 to $5.75 a share.
"We will be able to hold because we have robust productivity programs underway," said Boeing Chief Financial Officer James Bell of the company's reaffirmed profit targets. The company has also made changes to a long-term executive compensation plan that lowers the plan's expenses, he said.
Brokers polled by Thomson Financial had forecast 2008 sales of $71.3 billion and profit of $6.04 per share for next year.
The Chicago-based aircraft maker in mid-October warned that it would delay first deliveries of its new 787 Dreamliner by six months, to late November or December 2008, after running into problems assembling the first aircraft because of shortages and hold-ups in the supply chain.
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