Boeing Sees 40 Percent Earnings Jump, But Costs Concern

Boeing Co.’s second-quarter earnings report will be scrutinized for signs that the world’s largest maker of commercial aircraft is having trouble controlling costs as output jumps, investors and analysts say.

Boeing is expected to report that earnings rose 40 percent in the second quarter, bolstered by a rapid increase in deliveries of jetliners to the world’s airlines. Boeing delivered 92 planes during the second quarter, up from 62 in the year-ago period.

The average estimate of 15 analysts surveyed by IBES International Inc. is for earnings of 59 cents a share, up from 42 cents in the year-ago period.

Costs are expected to be higher because Boeing has been hiring workers by the thousand in recent months to meet demand for aircraft. Investors got a nasty surprise in the first quarter when rising costs caused Boeing to miss analysts’ earnings estimates.

“The assumption is that Boeing’s earnings will be a little on the weak side,” said Bill Whitlow, manager of the Safeco Northwest Fund, which owns 44,200 Boeing shares.

The company’s shares tumbled 6.5 percent on April 28 after Seattle-based Boeing reported earnings that missed estimates. Most analysts said that any surprise for the second quarter is unlikely to be that severe because they’ve lowered expectations.

Peter Jacobs, an analyst at Ragen MacKenzie in Seattle, recently cut his secondquarter earnings estimate for Boeing to 58 cents a share from 65 cents because he’s concerned that costs are still mounting as Boeing trains new employees.

Boeing hired about 2,900 people in the five-week period ended June 19, amid a struggle to meet surging demand for jetliners. That’s up from about 1,300 workers a month for most of this year, according to the company.

The company had expected the bulk of the company’s hiring would be done last year, when it added 20,000 people. Through mid-June, Boeing had hired another 10,000.

Boeing needs people to fill the spate of orders its gotten in recent years. It won orders for 717 aircraft last year, more than double the 346 it got in 1995. Boeing in May said it will boost production to 43 planes a month by the second quarter of next year from about 29 a month now to meet that demand.

Increasing output has been difficult for the company. Boeing officials acknowledge that they have missed some delivery dates to airlines waiting for its smaller 737 and 757 aircraft, though they declined to be more specific.

Some stocks that moved substantially or traded heavily Friday:

NYSE

Motorola, down 7 to 82

Robertson Stephens & Co. cut its rating on the stock to “long-term attractive” from “buy,” the Dow Jones News Service reported.

NASDAQ

Microsoft, down 8-15/16 at 140-1/2

The software maker’s profits rose nearly 90 percent in the latest quarter as the company saved money by shipping more software on CD-ROMs. But late Thursday’s report barely beat Wall Street’s expectations and Microsoft cautioned that it expects its revenue growth to slow.

Hechinger class A, up 23/32 at 2-23/32

Leonard Green & Partners LP agreed to acuire Kmart’s Builders Square unit and the struggling Hechinger chain with plans to combine them into the nation’s third-largest home-improvement retailer. Leonard Green is paying $127 million to buy Hechinger. Kmart did not disclose a sale price for Builders Square.

Cohu, up 7 at 43

The supplier of test handling equipment for semiconductor manufacturers reported earnings that beat Wall Street estimates for the quarter.