Boeing undershoots target on profit

Aircraft maker Boeing’s profit fell short of analyst estimates for the first time in five years, as an accounting loss from the first refuelling tankers built under a US Air Force contract overshadowed improvements in cash flow and the company’s 787 Dreamliner production.

First-quarter profit fell to $1.74 a share as Boeing recorded an after-tax charge of $156 million, its third related to the tanker development,according to a company statement Wednesday. Earnings trailed analysts' average estimate of $1.84.

Excluding the one-time charge and some pension expenses, earnings were $1.98 a share.

Boeing’s struggle to develop the first new US tanker since the 1980s has added to skittishness among investors. They’ve also been concerned about a glut of planes in the global aerospace market and a Bloomberg News report on a federal probe of company accounting.

However, the manufacturer exceeded forecasts in another key measure: Free cash flow of $483 million was better than the $357.6 million outflow anticipated by analysts.

"It's the gift that keeps on giving as Boeing absorbed another charge on tanker, but the cash flow story is intact," Jason Gursky, an aerospace analyst with Citigroup, said in a report to investors Wednesday.

Shares fell 0.7 per cent to $132.25 before the start of regular trading in New York. The planemaker’s shares have slipped 7.8 per cent this year through Tuesday, the third-worst result among the 30 members of the Dow Jones Industrial Average.

Investors are also waiting for Chicago-based Boeing to generate a gush of cash from the 787 Dreamliner as costs stabilise. Output will rise to 12 aircraft a month this year and a monthly rate of 14 later this decade, both records for long-range aircraft.

Deferred production costs for the 787 rose $141 million to $28.7 billion from the end of 2015, a smaller increase than the previous quarter. Boeing has said the figure, which measures funds already poured into inventory and labour against increases in production efficiency, will plateau this year as it speeds output.

Boeing spent less than $5 million to produce each Dreamliner in the quarter as it makes progress toward breaking even on the program, Ken Herbert, an aerospace analyst with Canaccord Genuity, said.

“The first quarter is typically one of the weakest for cash,” Mr Herbert said.

Free cash flow in the reporting period represented a “$900 million swing from a year ago.

”Per-share profit results were for a measure that the planemaker dubs core earnings, which it says gives a clearer picture of its results by adjusting for market fluctuations in pension cost. Net income slid 9 per cent to $1.21 billion, or $1.83 a share, from a year earlier.

Total sales advanced to $22.6 billion, exceeding the $21.5 billion projected by analysts.

Profit tumbled 36 per cent at Boeing’s commercial airplanes division to $1.03 from a year earlier as the company delivered fewer jetliners and absorbed costs for the tanker development and slowing 747 jumbo jet output.

Defence division profit grew 11 per cent to $822 million, reflecting strong performance on military aircraft such as the F-15 fighter program.

The tanker-related charge is the third reported by Boeing, which had already absorbed $1.26 billion in pretax accounting losses converting its commercial 767 jetliners into aerial gas stations for the Pentagon. Wiring issues and damage to a test aircraft’s fuelling system erased any profit for the first of potentially $80 billion in planes.

The latest charge reflects added costs “to maintain schedule with concurrency between late-stage development testing and the transition to initial production”, Boeing said Wednesday. – Bloomberg