Boeing Profit Falls on Military, Civil DelaysBy Reuters - | Posted 2008-07-23 Email Print
Is it the energy-affected economy or the multiple project delays that are hurting Boeing's stock price?
NEW YORK (Reuters) - Boeing Co (BA.N: Quote, Profile, Research, Stock Buzz) reported a greater-than-expected 19 percent drop in quarterly profit on Wednesday as it took a charge on a delayed military plane contract and suffered knock-on effects of its troubled 787 Dreamliner program.
The world's biggest-selling plane maker and the Pentagon's No. 2 contractor had lower sales at both its commercial and military operations, but held to its financial forecasts for this year and next, citing strong global demand for its products.
The Chicago-based company, along with Airbus, a unit of EADS (EAD.PA: Quote, Profile, Research, Stock Buzz), is hoping high oil prices will spur demand for its new fuel-efficient planes, but shares of both companies have suffered over the past few months as investors worry that prolonged increases in oil prices will prompt a global recession.
Its shares, which have fallen 36 percent from their all-time high a year ago, hurt by repeated delays on its new 787 Dreamliner and rising oil prices, fell a further 4 percent in premarket trading to $66.37.
"The real surprise of this quarter is the unusually soft performance at commercial aircraft," Robert Stallard of Macquarie Securities said in a note to clients. "However, there is nothing in this quarter which we view as a fundamental, long-term problem."
Boeing, which beat archrival Airbus in the race for orders last year, reported second-quarter net profit of $852 million, or $1.16 per share, compared with $1.05 billion, or $1.35 per share, a year earlier.
Profit was cut by a charge of $248 million for delays on a surveillance plane the company is building for Australia, known as Wedgetail. Boeing warned about the charge, which cut 22 cents off earnings per share, earlier this month.
Including that charge, Wall Street's average earnings forecast was $1.23 per share, according to Reuters Estimates.
Overall revenue was down very slightly to $16.96 billion, below the $17.28 billion expected by analysts.
Boeing's commercial plane unit, which hit an industry record for orders last year, reported a 2 percent drop in revenue to $8.6 billion. It delivered more planes to customers in the quarter than a year earlier, but delivered more of its less expensive, single-aisle 737s and fewer of its more lucrative 777 minijumbos.
The unit said it was also hurt by costs absorbed by other production programs due to the latest delay on its 787 Dreamliner, which is now at least 14 months late after a succession of production problems.
Boeing said it was still having problems putting together the first batch of Dreamliners for testing, but stuck with its timetable for first flight in the fourth quarter and first delivery in the third quarter of 2009.
Boeing's defense unit also reported a slight drop in revenue to $7.93 billion due to fewer military aircraft deliveries and lower sales of its network and space systems. The Wedgetail charge lopped $248 million off the unit's profit.
For the full year, Boeing stood by its earnings forecast of $5.70 to $5.85 per share. Analysts expect $5.85, on average. The company also held to its 2009 forecast of $6.80 to $7.00 per share. Analysts expect $6.95, on average.
(Editing by John Wallace)
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