Boeing predicts ‘very strong’ year
CHICAGO — Boeing Co. offered an upbeat forecast Wednesday for its quest to retake the world’s top spot in commercial aviation from European rival Airbus SAS, citing a “very strong” outlook for airplane sales while upping its profit expectations for 2006.
The aerospace company’s shares rose $3.31, or 4.9 percent, to close at $71.62 on the New York Stock Exchange, approaching its all-time high of $72.40 set in December.
Boeing said its fourth-quarter earnings more than doubled as its resurgent commercial airplane division boosted revenue and profit margins.
Chicago-based Boeing also said it booked a record 1,029 orders for new planes last year, pushing the value of its airplane backlog to $124 billion. Boeing Chairman and CEO Jim McNerney said the company plans to boost productivity through several new manufacturing initiatives to meet the brisk demand.
“Our focus is on executing that backlog better than we ever have, and increasing the backlog at the same time,” he said during a conference call Wednesday.
Analysts generally were impressed by widening profit margins at both Boeing’s commercial airplane and defense units, though they cautioned that production must keep pace with demand.
“Execution is the story,” said analyst Cai von Rumohr of SG Cowen Securities. “It’s not just what the orders are. It’s what you can make out of them.”
Boeing reported fourth-quarter net income of $460 million, or 58 cents per share, up from $186 million, or 23 cents per share a year earlier. Analysts were expecting 44 cents a share, based on the consensus estimate by Thomson Financial.
The year-ago profit was depressed by heavy charges for ending production of its 717 jet and writing off its loss of a controversial Pentagon contract for air tankers.
Boeing said fourth-quarter revenue grew 7 percent to $14.2 billion but fell below Wall Street estimates of $14.8 billion.
Boeing’s Seattle-based commercial airplane division had operating earnings of $330 million, up from a $149 million loss in fourth quarter 2004.
“It was obviously an excellent quarter,” said analyst Mark Davis at FTN Midwest Research. “They’re starting to see real leverage in commercial airplanes, both in terms of orders and manufacturing initiatives that are helping margins.”
The record year for airplane bookings was buoyed by 379 orders for its fuel-efficient 787 Dreamliner. The strong demand for the 787, due out in 2008, helped Boeing close the gap on Airbus, which surpassed Boeing in jet order volume in 2001.
Toulouse, France-based Airbus said earlier this month it unexpectedly beat Boeing’s tally for jet orders last year. But Boeing eclipsed Airbus in value terms after winning 70 percent of global orders for larger, pricier planes like the 787.
Boeing reiterated its expectation to deliver 395 planes in 2006, though McNerney said it likely would fall short of the 1,029 orders it booked last year.
For the full year, Boeing’s net profits grew 37 percent to $2.6 billion, despite a four-week strike at its airplane production facilities. Boeing’s earnings amounted to $3.20 a share in 2005 versus $1.87 billion, or $2.30 a share, a year ago.
The strike shaved off $2.3 billion in annual revenue, which still grew 4.3 percent from a year earlier to $54.8 billion.
McNerney reiterated Wednesday that revenue growth at its defense unit could ebb some in coming years as U.S. defense spending slows. He said a consolidation of its defense businesses announced last week should help offset the slowdown through cost cuts and better productivity.
Fourth quarter operating profits from defense rose 37 percent to $924 million.