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Boeing beats expectations, raises earnings outlook

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By Michelle Dunlop
Herald Writer
Published:
The Boeing Co. boosted its full-year outlook for the second time this year, based on 27 percent second-quarter growth in commercial jet deliveries and higher military aircraft sales.
Boeing’s net income rose to $967 million, or $1.27 a share, from $941 million, or $1.25, a year earlier, Boeing said Wednesday. The average of 24 analysts’ estimates of what the second-quarter figure would be, compiled by Bloomberg News, was $1.13.
Boeing shares closed at $74.01 on Wednesday, up $1.98.
In a conference call with journalists and analysts, Boeing officials were upbeat about aircraft orders and deliveries, including for the 787 program, despite a “fragile” world economy.
“You got to keep in mind these airplanes ... are replacement airplanes,” said CEO Jim McNerney. The new airplanes offer better fuel efficiency, making them “a very quick payback investment” for carriers.
That strong demand for jets from airlines around the world prompted Boeing to raise its forecast for full-year profit to a range of $4.40 to $4.60 per share, compared to an April prediction of $4.15 to $4.35 per share. That’s down from $5.34 a share in 2011. Rising pension expense, declining U.S. defense spending and lower margins on two new models have been eating into earnings.
Douglas Harned of Sanford C. Bernstein & Co. and other analysts had expected McNerney to raise the forecast, saying he has a history of conservative predictions at the beginning of the year. The average estimate in a Bloomberg survey of 27 analysts was $4.61.
Boeing Chief Financial Officer Greg Smith said the company will still meet a goal of delivering 35 to 42 Dreamliners this year, even though the company handed over only 11 in the first half of 2012.
“I’d say we’re tracking pretty much to plan,” Smith said.
The company built more 787s in the second quarter than it delivered, due in part to troubles at Air India. That carrier has endured a pilots strike and is bogged down in bureaucracy over Dreamliner compensation for untimely delivery. India’s government made some progress on Wednesday in clearing the way for 787 deliveries.
Dreamliner deliveries will ramp up in August, Smith said. Boeing expects half of the remainder of 787 deliveries this year to come out of the Everett Modification Center, where workers are bringing early-built 787s up to certification standards, and half off production lines in Everett and North Charleston, S.C.
CEO McNerney described a recently discovered problem with 787 Rolls-Royce engines as “minor” and said it won’t affect the number of Dreamliners delivered this year.
Boeing is rapidly speeding production and deliveries of the new 787. The company still plans to be at a production rate of five 787s per month at the end of 2012 and 10 787s monthly at the end of next year.
McNerney did not provide new information on when Boeing would offer a highly anticipated larger version of the Dreamliner, the 787-10X, to customers. The company is expected to go to the board of directors late this year or early next for approval.
The 787-10X “looks like a pretty good airplane that will have a lot of market demand,” McNerney said.
Boeing has been booking orders for the new 737 MAX, a redesigned, re-engined version of the present 737. Aeromexico announced a tentative order for 90 MAX jets and 10 787s on Wednesday.
McNerney remains hopeful that the company also will land some new orders for its revamped 747-8. The company hasn’t added a firm order for the 747 yet this year and had just 84 unfilled requests at the end of June.
“I am not worried strategically at all,” McNerney said. “There are a couple (order) campaigns that we need to convert over the next six months.”
Boeing defense unit revenue rose 7 percent. Defense is vulnerable to potentially severe military spending cuts in January. But it’s clear the unit is still holding strong. The second-quarter revenue growth is about the same as that of the first three months of the year.
“A performance like this had generally been expected for Boeing Commercial Airplanes, given the lack of known issues on the aircraft programs this quarter,” wrote Robert Stallard, an analyst with RBC Capital Markets in London. “Where Boeing has arguably beaten is on defense though, where expectations have been understandably low.”
Bloomberg News and The Associated Press contributed to this report.
Story tags » Boeing

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