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Boeing Stock Price Dips After Production Cuts Announced

Boeing Co. shares dropped after the company said Friday that it will produce fewer jets in 1996.

The stock fell $1.00 to $61.62 in a shortened, pre-holiday session during which 812,000 shares were traded, compared to its three-month daily average of 1.25 million shares. Boeing shares have fallen $3.12, or 4 percent, since Thursday’s close.

Seattle-based Boeing said it will scale back production on two of its jetliners next year, the 737 and the 757. Total airplane deliveries in 1996 are expected to drop by about 30 to 200.

Boeing said production of its smallest plane, the 737, will be cut to five from seven a month in April 1996. Scheduled production of its 757 jet will be reduced to three planes a month from four in June 1996, the company said.

The cuts mean Boeing expects to produce about 17.5 jets a month next year, down from a peak of 39.5 planes a month in 1991.

“The production rate cuts gave (investors) a fundamental reason to pull back,” said George Shapiro, analyst at Salomon Brothers.

Boeing may slow production of older model 737s in favor of orders for a newer 737 to be delivered beginning in October 1997, Shapiro said. The company also may shift production to the 777, since most of Boeing’s new orders are for the newer type aircraft, Shapiro said.

Earnings in 1996 and 1997 will be less than previously expected, Shapiro said. He revised his 1996 earnings estimate to $2.50 a share from $2.90 a share and 1997’s estimate to $5.50 from $6.

Boeing has slowed production and cut its payroll by about 60,000 people in the last four years amid a worldwide slump in the airline industry.

No significant layoffs are expected to result from the latest round of production cuts, although total employment could fall some next year, the company said.

Analysts say recent increases in orders are a sign that the industry is recovering. Boeing has received orders for 147 planes this year, compared with 120 orders in all of last year.

That includes a long-awaited order announced two weeks ago for 23 777s and five 747s from Saudi Arabian Airlines. The 147 figure doesn’t include letters of intent for another 36 planes announced at the Paris Air Show last month.

Boeing’s stock has risen 44 percent from $42.50 last September. It reached a record $65.38 on June 23.

Merrill Lynch & Co. analyst Byron Callan on Friday reiterated his “above average” recommendation for the stock as a medium-term buy. Salomon’s Shapiro maintains a “strong-buy” recommendation.

Boeing also said it will deliver 30 new, twin-engine 777 widebody jets next year, compared with 19 this year.