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Boeing profits, revenues surprise Wall Street

Post by John Gillie / The News Tribune on Oct. 24, 2012 at 6:54 am |
October 24, 2012 6:57 am

Boeing’s third quarter profits and revenues announced today were a pleasant surprise for Wall Street which had expected less encouraging results.

The aerospace giant reported earnings per share of $1.35. That compares with an average analyst profit forecast of $1.12 a share. The company’s results even exceeded the highest estimate, $1.29 a share, among 18 analysts polled.

Those surprising results led Boeing to raise its forecast for total 2012 earnings from a prior prediction of $4.40 to $4.60 a share to $4.80 to $4.95 a share.

The company’s revenues of $20 billion were 13 percent higher than last year’s third quarter when Boeing reported revenues of $17.72 billion. Credit commercial airplane deliveries that were both 17 percent higher in numbers and skewed more toward higher-priced aircraft than in last year’s third quarter.

There was good news and bad news with those increased deliveries to customers. Many of those aircraft were Boeing’s newest, high-value planes, 787 Dreamliners and 747-8s, which carry higher prices. But because of huge startup costs and production delays, those aircraft profit margins were slim or non-existent.

The Puget Sound-based Commercial Airplanes division reported smaller operating margins, 9.5 percent versus last year’s third quarter’s 11.4 percent as a result. Revenues for the Commercial Airplanes operation, however, rose by 28 percent as Boeing began delivering 787s and 747-8s in earnest.

The company said higher pension costs were also to blame, in part, for the weaker profits than last year.

“Strong core operating performance drove increased earnings in both our major businesses along with higher overall revenues, improved cash flow and sold earnings per share even as pension headwinds rose,” said Boeing Chairman Jim McNerney.

Boeing shares rose 3 percent in pre-market trading this morning.

RBC Capital Markets analyst Robert Stallard told MarketWatch that he was pleased that operating results remained strong despite those factors. “What is notable is that margins held in at 9.5%, despite the dilutive impact of increased 787 and 747-8 deliveries,” he said.

Boeing noted that its experiencing a good order year, a development that bodes well for future results. The company saw customers order 369 commercial airplanes during the third quarter raising Boeing’s backlog to 4,100 aircraft worth $307 billion. New orders pushed the company’s popular 737 past the 10,000 total orders mark during the last quarter.

The company is raising production levels on all of its commercial aircraft lines. Just this week, Boeing began ramping up the 777 assembly line to 8.3 planes a month, its highest ever. In Renton, the company is working to raise production of its best-selling 737 to 42 a month. And in South Carolina, where Boeing built a second plant to assembly 787s, the company delivered its first South Carolina-built Dreamliner to Air India.

Boeing’s other major division, Defense, Space and Security, saw flat earnings a $827 million despite a 4 percent drop in revenues to $7.84 billion.

The backlog for that division was $71 billion. The defense division faces the prospect of lower revenues as the federal government contemplates the prospect of lower defense expenditures in the face of budget and deficit-reduction measures.

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