Despite 787 troubles, dream earnings for Boeing
The Chicago-based company boosted its 2013 earnings projection to a range of $6.20 to $6.40 per share, up 10 cents per share from the company's previous estimate in April. Boeing also beat analyst predictions for second-quarter earnings, reporting on Wednesday a profit of $1.67 per share, topping the $1.58 average estimate of 20 analysts surveyed by Bloomberg News.
Boeing is reaping rewards from a faster assembly pace for 737s, 777s and 787s as a global aviation boom boosts demand for large jets. The planemaker shipped 169 commercial aircraft in the quarter, up 13 percent from a year earlier, including 16 Dreamliners delivered after regulators cleared the plane to fly in April after a three-month grounding.
Jim McNerney, Boeing's chief executive, downplayed concerns about the company's 787 program in light of a July 12 fire aboard a Dreamliner parked at London's Heathrow Airport.
"We remain highly confident in the future of the 787 program and the integrity, safety and performance of the airplane," McNerney said.
Investigators don't believe the fire in the parked Ethiopian Airlines 787 is linked to the jet's main lithium-ion batteries. The 787 was grounded by federal regulators in January after battery systems failed on two 787s. Regardless of the 787's troubles this year, "support for this airplane remains high," McNerney said.
McNerney declined to give details about repairs to Ethiopian's Dreamliner, saying the company and airline still are discussing the matter. The fire in that 787, which apparently started in an off-the-shelf emergency locator transmitter unit, caused more extensive damage than what occurred from the two battery incidents earlier in the year. But Boeing's CEO was confident in the company's ability to repair damage to composite fuselages.
"For the last five or six years, we've thought about how to repair composite structures when they are damaged," he said.
Boeing executives also were upbeat about Dreamliner production in Everett and North Charleston, S.C., reiterating the company's plan to deliver more than 60 787s this year. Twelve of those deliveries will be 787s assembled in North Charleston, said Greg Smith, Boeing chief financial officer. Fifteen of the deliveries will be of the early produced 787s that have been parked around Everett's Paine Field, awaiting modifications. The remainder of the 787 deliveries this year will be off the Dreamliner assembly line in Everett, Smith said.
CEO McNerney acknowledged a slip in schedule on the newest version of the Dreamliner, the longer 787-9. The company began assembly this spring in Everett. Boeing is preparing to flight-test the 787-9 but has pushed delivery of the first airplane back to mid-2014, rather than early next year.
McNerney said he's "bullish" about Boeing's widebody jet lineup, including an updated 777X. Formal launch of that re-engined aircraft is still on target for later this year. Boeing won't announce a decision on where it will build the 777X's composite wing for two to six months after the launch. Washington leaders have been busy paving the way for Boeing to build a new 777X facility in Everett if the company chooses to do so.
Wall Street responded positively Wednesday to Boeing's earnings, pushing shares to a 52-week high of $109.49 before they fell to $106.95, a drop of 84 cents for the day. The stock has advanced 43 percent this year through yesterday, topping a 19 percent gain for the Standard & Poor's 500 Index.
"Boeing is going to generate a tremendous amount of cash over the next few years," Peter Arment, a Birmingham, Ala.-based analyst with Sterne Agee & Leach Inc., said Wednesday in a telephone interview. "This quarter is the beginning of evidence of that."
Operating cash flow doubled to $3.5 billion as Boeing increased sales and factories worked more efficiently. The company also repurchased 10.2 million shares valued at about $1 billion and paid $400 million in dividends, a 12 percent increase from a year earlier.
"Investor focus has switched to Boeing's cash flow," Robert Stallard, a New York-based aerospace analyst with RBC Capital Markets, wrote in a research note Wednesday. While cash generation "was strong, we would have expected the company to have been more aggressive on the buyback in the quarter. Presumably this leaves plenty of firepower for future buybacks or dividend increases."
Bloomberg News contributed to this report. Michelle Dunlop: 425-339-3454; firstname.lastname@example.org.
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