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More deliveries yield more profit for Boeing

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By Dan Catchpole
Herald Writer
@dcatchpole
Published:
Increased commercial jet production helped the Boeing Co. post a big profit in the first three months of 2014, even with a $330 million cost related to a negotiated change in retirement benefits for the Machinists union.
During a conference call Wednesday with financial analysts and news media, executives for the Chicago aerospace giant reaffirmed the company’s focus on maintaining a strong bottom line by increasing airplane factory efficiency, and cutting labor and supply costs.
In the first quarter of 2014, Boeing turned out 161 new airplanes — more than during the same period last year — and had a $965 million profit.
Faster plane production helped raise revenue at Boeing’s commercial plane unit by 19 percent. In April, the 737 line in Renton reached a production rate of 42 a month. Boeing hopes to go to 47 a month in 2017 to meet worldwide demand for narrow-body jetliners.
In March, Boeing’s 787 Dreamliner program reached a production rate of 10 per month. However, only 18 were delivered. The much-delayed program has most recently been slowed by potential cracks in wings produced in Japan and unfinished work on fuselage sections made at the company’s North Charleston, S.C., plant.
“There’s still some work to do,” but the company’s seen progress in decreasing the amount of unfinished work, Boeing CEO Jim McNerney told analysts and reporters.
As for the wing issue, “I’d say that’s behind us at this point,” he said.
The company will have to work hard to keep 787 deliveries up this year as it introduces the airplane to 18 new customers and produces more 787-9s, the first of which is set to be delivered to Air New Zealand this summer.
The company assembles the 787-8 and -9 in the Everett and North Charleston plants. Boeing added a third assembly line in Everett to make up for slower-than-planned production in South Carolina. Earlier this year, the company added about 1,000 workers in North Charleston as it worked to reduce “traveled” work.
The continued 787 headaches have helped keep the company’s stock price flat this year after it nearly doubled in 2013. With Wednesday’s news, the stock was up about 2 percent.
Christian Mayes, a St. Louis-based analyst for Edward Jones, is neutral on Boeing as an investment.
Boeing raised earnings expectations for the year, but the increase was due to a $150 million tax settlement in the company’s favor.
“I would’ve preferred if that were for operating improvements,” Mayes said.
During the call, executives said they are confident the company will have no problem continuing production of the classic 777 as it starts producing the plane’s successor, the 777X, later this decade.
Of course, “there will be some pricing pressure” on the classic 777, McNerney said.
Boeing currently has orders for nearly 300 777 classics, most for the 777-300ER. At a production rate of about 100 a year, that will keep the assembly line in Everett busy into 2017, three years before the company has promised first delivery of the 777X.
However, it will likely be a couple more years before the 777-300ER’s replacement comes onto the assembly line.
McNerney said the company’s confidence that it can bridge the production gap is based, in part, on conversations with existing customers of what has been one of the most reliable jetliners produced.
Boeing’s total backlog is 5,100 airplanes with a list-price combined value of $374 billion.
For the improvements in Boeing Commercial Airplanes, revenue for the company’s defense side fell 6 percent, and Boeing lowered full-year revenue guidance for military aircraft to $14.2 billion, down from $15 billion. Its global support and services revenue is expected to climb, however, from $7.8 billion to $8.6 billion. Both changes reflect a realignment within the defense unit.
Net income for the entire company was actually down 12.7 percent from last year’s $1.1 billion first quarter profit, but that is because Boeing took a $330 million accounting write-off related to changes in retirement plans. The company also noted that 2013 earnings were inflated by a one-time research-and-development tax credit.
Net income per share dropped to $1.28 per share from $1.44 during last year’s first quarter. But adjusted to exclude the write-off, earnings were $1.76 per share, beating the estimate of $1.56 per share from Wall Street analysts surveyed by FactSet.
The company reported $20.47 billion in revenue, more than the $20.15 billion expected by Wall Street. That’s up 8 percent from the $18.9 billion in revenue during the same period last year.
Boeing also repurchased 19.4 million shares for $2.5 billion during the first quarter.
The Associated Press contributed. Dan Catchpole: 425-339-3454; dcatchpole@heraldnet.com.
Story tags » BoeingAerospace

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