Wednesday, July 26, 2017

Boeing Curbs Costs, Boosting Profits and Shares: Stock jumps more than 9% as jet maker reports strong earnings and raises forecasts



The Wall Street Journal
By Doug Cameron
Updated July 26, 2017 3:47 p.m. ET


Boeing Co. continues to clamp down on the cost of building jetliners, boosting profits at the world’s largest aerospace company and on Wednesday driving its shares up nearly 10%.

The company reported forecast-beating earnings for a fifth quarter in a row on Wednesday. It also lifted its full-year targets again as it boosts production from an order book of 5,700 aircraft and defense equipment worth almost $500 billion.

Boeing has emerged from a long stretch beset by problems building new jets such as the 787 Dreamliner, with the smoother launch of new models and a focus on reducing expenses through a mix of thousands of job cuts and more efficient factories.

It is also chasing a bigger share of the market for maintaining aircraft for airlines and military customers, a pursuit that has unsettled relations with some of the suppliers that are crucial to boosting output of its commercial jetliners.

“There’s some sense of nervousness and uncertainty as we ramp up,” Chief Executive Dennis Muilenburg said. “There’s going to be some places where we make some tough decisions, develop alternatives.”

He said Boeing was keeping a close watch on the supply chain as it works to boost production of its 737 workhorse jet by more than a third over the next three years, countering slower sales of its larger widebody planes.

The slimmer workforce and new manufacturing processes are also being used to test the potential for profitably building an all-new twin-aisle jet seating more than 200 passengers.

Boeing shares have climbed by almost 50% this year as investors gain confidence that the rise in global airline passenger traffic will ensure that airlines follow through on all of the jet orders placed in recent years with the U.S. company and rival Airbus SE, which reports Thursday.

The surge in Boeing’s stock Wednesday, up 9.9% at $233.45, made it the largest component in the Dow Jones Industrial Average, overtaking Goldman Sachs Group Inc.

Boeing’s cost-cutting efforts helped it generate more than twice as much free cash as analysts were expecting for the latest quarter, prompting a bump to planned stock buybacks. The company is also prepaying big pension commitments due over the next four years.

Mr. Muilenburg said free cash flow is expected to rise year on year through the end of the decade. Boeing plans to lift stock buybacks to $10 billion this year and will return all of its free cash to shareholders in the form of repurchases and dividends.

Boeing reported quarterly profit of $1.76 billion, or $2.89 a share, swinging from a year-earlier loss of $234 million that reflected charges on its commercial and military programs. Revenue fell to $22.74 billion from $24.76 billion, after Boeing delivered fewer jets as it transitioned to an upgraded version of the 737 and slowed output of its 777 jetliner.

The company still expects to deliver 760 to 765 jetliners this year, and Mr. Muilenburg said plans to sell aircraft to airlines in Iran next year remain on track. Its order book rose to $482 billion.

Boeing boosted its 2017 earnings guidance for the second time this year, adding 60 cents for a range of $9.80 to $10 a share. Its sales guidance was unchanged at $90.5 billion to $92.5 billion.

—Ezequiel Minaya contributed to this article.

https://www.wsj.com

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