Boeing 787 Dreamliner finally helps plane-maker deliver profit

Boeing profits rose as the 787 Dreamliner emerged from a decade of losses and helped the company weather a turbulent market for wide-body jetliners.

The world’s largest aircraft maker is counting on its marquee carbon-fibre jet and higher output of its single-aisle 737, a workhorse with discount airlines, to bolster results this year.

Boeing forecast higher cash and earnings per share, while predicting a sales decline as it makes fewer 777 wide-body aircraft.

Investors, focused on Boeing’s potential cash bounty, responded favourably. The shares rose 1.5 per cent to $163.02 at 8:40am in New York, before the start of regular trading. Boeing climbed 29 per cent during the 12 months ending Tuesday, outpacing the 21 per cent gain for the SandP 500 Index.

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The Chicago-based company has pledged to return 100 per cent of cash flow to investors, repurchasing shares and bolstering its dividend as a near-record order backlog shelters the manufacturer from market shocks.

Boeing is counting on improving Dreamliner profitability, resurgent defence spending and a new family of 737 narrow-body jets to counteract rising trade tensions with China and a glut of older twin-aisle aircraft.

"We think this release is pretty boring – and boring is good," Robert Stallard, an analyst with Vertical Research Partners, said in a report to clients.

Boeing’s report a year ago caught investors off guard with a forecast of fewer 737 deliveries.

Order shortfall

Revenue will fall to a range of $90.5 billion (€84.2bn) to $92.5 billion (€86.1bn) this year, Boeing said, as the company slows production of the 777 this month and in the third quarter because of an order shortfall. Analysts had expected annual sales of $93 billion.

While the cuts will mean fewer deliveries of one of Boeing’s main profit-drivers, total shipments will rise as Boeing cranks up production of the 737, its main source of profit.

Boeing expects to deliver between 760 and 765 commercial airplanes, an increase from last year’s 748.

Operating cash flow will be about $10.8 billion (€10.05bn), up from the $10.5 billion (€9.7bn) generated in 2016. Earnings adjusted for pension expenses will probably be $9.10 to $9.30 a share this year, compared with the $9.24 predicted by analysts.

To keep its cash machine humming, Boeing is counting on a smooth debut for the upgraded 737 Max, while it speeds output by 12 per cent at its narrow-body factory in Renton, Washington, to a record 47 jets a month.

Boeing also benefited as deferred production costs for the 787 Dreamliner fell $215 million (€200m) to $27.3 billion (€25.4bn), according to the company’s website.

The plane maker reached the crossover point last year where unit costs for the cutting-edge jetliner finally fell below its sales price. Since then the balance of deferred costs has started to shrink with each 787 that rolls out of Boeing’s factories.

Three years late

The jetliner is the first built of spun carbon-fibre composites rather than aluminium, and entered commercial service in 2011, more than three years late following a series of production and supply-chain breakdowns.

Fourth-quarter earnings adjusted for pension expenses were $2.47 a share, despite a $312 million accounting loss for an aerial tanker programme, the company said on Wednesday in a statement. That was 15 cents more than analyst had expected.

Revenue fell 1.2 per cent to $23.3 billion, compared with analysts’ projection of $23.1 billion. Free cash flow was $2.23 billion, while analysts had expected $2.02 billion.

Boeing’s commercial airplane business posted an operating profit of $1.47 billion, more than double its result from a year earlier.

– Bloomberg