Thursday, January 26, 2017

Boeing’s Quarterly Profit Climbs: CEO expects new jetliner orders this to year mirror the 668 secured last year

The Wall Street Journal
Updated January 25, 2017 3:15 p.m. ET

Boeing Co. on Wednesday reported forecast-beating quarterly earnings and signaled that cash flow and profit are expected to keep climbing despite swings in aircraft production as it rolls out new models.

The world’s largest aerospace company faces a crucial year as it delivers its first 737 Max jetliner and pushes out a new version of the 787 Dreamliner. It is also prepping for a large increase in production even as orders start to slow after a six-year aircraft boom.

Boeing expects revenue to dip this year, but the cash flow that has powered big stock buybacks and higher dividends was above analysts’ expectations for the latest quarter, boosting its shares 4.5% to $167.76 in afternoon trading Wednesday.

The Chicago-based company reported a 60% rise in fourth-quarter profit and forecast per-share earnings for 2017 of $9.10 to $9.30, in line with expectations and above last year’s result. Annual revenue is pegged at $90.5 billion to $92.5 billion, based on a small rise in jetliner deliveries from 2016 to between 760 and 765. Revenue totaled $94.6 billion last year.

Boeing Chief Executive Dennis Muilenburg said on an investor call that he expects new jetliner orders this year to mirror the 668 secured last year. Production of its 737 jets is on track to rise this year and climb to 57 a month by the end of the decade from 42 at present.

Operating cash flow was forecast at $10.75 billion for 2017. That was above most analysts’ expectations, and helped counter news of yet another charge to the company’s military tanker program. Boeing will take a $312 million pretax charge on the KC-46A Pegasus program that has already cost the plane maker about $2 billion in write-offs.

The Pegasus tanker, which is Boeing’s largest defense program, has been hit by design and manufacturing issues that have triggered three charges over the past year and left the project more than 40% over its original budget.

Initial deliveries to the U.S. Air Force had been delayed but are still expected to start in August under the revised schedule

The latest charge follows sharp criticism of the cost of military programs by President Donald Trump that drew a commitment from Mr. Muilenburg to cap the cost of the two 747 jets it plans to build to replace the existing Air Force One fleet.

Boeing is building the first tranche of Pegasus refueling jets under a fixed-price deal that has it paying for any cost overruns. It secured a $2.8 billion deal last year for 19 of the planes, which are based on its 767 passenger jet, and expects to sell an initial 179 to the Pentagon, with global demand estimated at more than 400 planes. The first Pegasus planes are due to be delivered in August.

Boeing reported a fourth-quarter profit of $1.63 billion, or $2.59 a share, up from a year-earlier $1.03 billion, or $1.51 a share. Excluding items, the company had an adjusted profit of $2.47 a share, topping analysts’ estimates for $2.35 a share. Revenue slipped 1.2% to $23.29 billion, slightly above analysts’ expectations.

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