Boeing sales fall, more cuts loom, shareholder payouts rise

EVERETT — Boeing executives won’t say how much longer they see the slow-motion job cutting continuing.

The company cut its global workforce by 1,176 during the first three months of the year. Most of those cuts have come around the Puget Sound area, including nearly 500 layoff notices issued last week.

Previously, Boeing executives have said they want to keep up the pace of job cuts in 2016, when they slashed nearly 11,000 jobs, mostly through buyouts and attrition.

Company-wide efforts to cut labor and other costs contributed to Boeing posting better payouts to shareholders for the first quarter of 2017. Better earnings from the 787 Dreamliner program also boosted cash flow for the manufacturer.

The bigger dividends came despite slumping sales and a drop in revenue to nearly $21 billion, about 7.3 percent less than the $22.6 billion revenue from first quarter in 2016.

Revenue was about $200 million less than analysts expected for the U.S. planemaker, which plans on delivering the newest version of its best-selling airplane, the 737, in May.

During a conference call with investment analysts and reporters Wednesday, Boeing Chief Executive Officer and Chairman Dennis Muilenburg said the company is committed to maintaining the talent it needs, even as it cuts its workforce.

While Boeing’s workforce has dropped overall, including 8,500 fewer jobs in Washington since the start of 2016, the company has hired more than 11,000 people in recent years, Muilenburg said.

As Boeing grapples with declining revenues in the next few years, the priorities remain sending cash to shareholders and investing in future development, he said.

During the call, he praised efforts by President Donald Trump and the Republican majority in Congress to simplify and lower corporate taxes and streamline federal regulations.

“These are things that clearly are working to our benefit broadly as an industry,” he said.

Wednesday’s earnings report highlights the Chicago-headquartered company’s need to continue squeezing costs and improving factory efficiency. The company increased how much it expects to earn this year due to paying fewer taxes, rather than an increase in revenue or other factors.

“The stock has been a high flier for a while,” George Ferguson, an analyst at Bloomberg Intelligence, said Wednesday. “People clearly had high expectations and this was a middling report.”

Production of the 787 could increase to 14 airplanes a month by the end of the decade. Company leaders had backed off that goal somewhat in public comments in 2016. However, during the teleconference, Muilenburg reiterated the goal of increasing production.

“Our plan is still to go to 14 a month by the end of the decade,” up from the current rate of 12 a month, he said.

Some industry analysts have said they expect the company to stay at the current rate or cut production.

Production of the 777 is dropping to about 3.5 deliveries a month after August. No further cuts are planned, Muilenburg said.

Next year, factory work is expected to pick up on 777X, successor to the 777, at Boeing’s Everett plant. Muilenburg seemed to imply but did not explicitly say that the 777X work will mean no net layoffs for the two aircraft programs.

With each 787 Dreamliner that rolls out of the factory, Boeing continues to whittle down the mountain of money it previously sank into the program, which entered the market three years late because of production and supply-chain delays. The tally, known as deferred production costs, fell $316 million to $27 billion from the previous quarter.

Boeing executives are counting on a steep improvement in cash and savings from the Dreamliner as the company refines the plane’s manufacturing process, builds more higher-margin models like the 787-9 and no longer has to compensate customers for late deliveries. The marquee aircraft, with a frame made of spun carbon-fiber, emerged as a money maker for Boeing last year after a decade of losses.

Increased cost on the KC-46 aerial refueling tanker program slightly dampened profits for Boeing. The total was about $140 million more than expected, but that covers the rest of the year, Boeing Chief Financial Officer Greg Smith said.

The company expects to start delivering the first tankers to the U.S. Air Force in early 2018.

First-quarter free cash flow of $1.63 billion contrasted with the average analyst estimate that the planemaker would consume $137 million during what’s typically the company’s slowest period. Boeing delivered 169 commercial jets, the fewest since the first quarter of 2014, as it began to stockpile 737 Max jets ahead of the initial delivery of the upgraded narrow-body next month.

First-quarter earnings adjusted for pension expenses were $2.01 a share, the company said Wednesday in a statement. That compared to the $1.91 average of analyst estimates compiled by Bloomberg.

For the full year, the company forecast adjusted earnings of $9.20 to $9.40 a share, up from a previous estimate of $9.10 to $9.30, mainly because of a reduction in the expected tax rate.

Material from Bloomberg was used in this report.

Dan Catchpole: 425-339-3454; dcatchpole@heraldnet.com; Twitter: @dcatchpole.