Boeing stock rises after upbeat earnings report

Published 10:17 pm Wednesday, January 30, 2008

EVERETT — The Boeing Co. exceeded Wall Street’s expectations for 2007 earnings but kept relatively quiet Wednesday on its thrice-delayed 787 Dreamliner.

Boeing Commercial Airplanes continued to add to its record backlog in 2007, boosting the value of its unfilled jet orders to $255 billion from $174 billion in 2006. And company officials anticipate another healthy sales year in 2008, which will keep both Boeing workers and suppliers around the Puget Sound region busy.

“Executing on our record backlog is what really counts,” said James Bell, Boeing’s chief financial officer, during a conference call. “That’s our goal for 2008 and for many years after.”

Boeing’s net income jumped 84 percent to $4.1 billion, or $5.28 per share, on increased commercial jet deliveries in 2007. The company’s revenue increased 8 percent over 2006 to $66.4 billion. Boeing raised its 2008 earnings per share expectations to between $5.70 and $5.85 per share.

Despite Boeing’s impressive 2007 results, company chief executive Jim McNerney acknowledged the jet maker struggled as well last year.

“We faced some tough business challenges — most notably in advancing our 787 into the flight test program,” McNerney said.

Earlier this month, Boeing announced its third major delay in delivering its new, fuel-efficient 787 Dreamliner. The company had anticipated delivering the first Dreamliner this year but has since pushed that back to 2009. Part shortages, supplier difficulties and trouble piecing together the first 787 all contributed to the delay.

“We’ve got the best of the Boeing team working on that program,” McNerney said.

The aerospace giant’s record backlog rests heavily on the future of its 787 Dreamliner jet. Less than four years since its launch, Boeing’s fast-selling 787 already makes up just under a quarter its commercial backlog in terms of order volume.

But McNerney and Bell remained mum on the revised 787 schedule, including the date when Boeing powers up the electronics in its first Dreamliner. The company continues to work with the Federal Aviation Administration to clear as many certification hurdles as possible on the 787 before the jet enters flight testing.

Although Boeing hasn’t released an official revised schedule for its delayed 787, McNerney said the company is working with both suppliers and customers to deal with the delay. Some of Boeing’s Dreamliner partners won’t see a paycheck until the plane has been delivered. Boeing also needs to keep an eye on suppliers as they ramp up production.

“We’re going through the process of adjusting the schedule,” McNerney said.

McNerney ruled out rumors that Boeing may replace some of its Dreamliner suppliers and reaffirmed his confidence in the global supply chain strategy that Boeing employed for the 787.

Boeing is expected to provide more details on the 787 during its first quarter 2008 earnings update in April.

Oppenheimer &Co. analyst Myles Walton told the Associated Press that the absence of a 787 production forecast from Boeing “does nothing to help alleviate the overhang currently hanging over the stock like a gloomy cloud.”

Wall Street responded early Wednesday morning nudging Boeing’s shares as high as $84.87 Wednesday morning. The company’s stock closed at $82.87, up $1.91 for the day. That’s roughly $25 per share lower than the company’s $107.83 high reached shortly after it unveiled the Dreamliner in Everett last summer. But Boeing’s stock has rallied over the past week after reaching a low of $74.12 when company officials announced the 787’s third delay.

Both Bell and McNerney expect to see the commercial jet order cycle continue into 2008, but don’t expect to match the 1,413 net orders the company notched last year.

Boeing still believes the major U.S. carriers will begin placing significant jet orders either this year or next.

“We have been in extended discussions with a couple of the major carriers,” McNerney noted. High oil prices eventually will drive U.S. airlines to order places that are more fuel efficient if they intend to be profitable, Bell added.

Because of the 787 delay, Boeing expects to deliver between 475 and 480 jets in 2008, down five from its original projections. The chief executive said he encourages Boeing managers to focus on 787 progress, but doesn’t want the 787 to distract them from other programs, such as the new 777 Freighter or 747-8. Although the latest passenger version of Boeing’s 747 hasn’t received many orders yet, McNerney remained upbeat on the “Queen of the Skies” future, dismissing speculation the company could cancel the passenger plane.

“We’ve got about 10 discussions going on with customers for the passenger version,” McNerney said. “None of our plans include an offramp here.”

Reporter Michelle Dunlop: 425-339-3454 or mdunlop@heraldnet.com. For more on Boeing, go to her Aerospace blog at heraldnet.com.