Boeing Profit Falls on Military, Civil Delays

NEW YORK (Reuters) – Boeing Co (BA.N: Quote, Profile, Research, Stock Buzz)reported a greater-than-expected 19 percent drop in quarterly profit onWednesday as it took a charge on a delayed military plane contract andsuffered knock-on effects of its troubled 787 Dreamliner program.

The world’s biggest-selling plane maker and the Pentagon’s No. 2contractor had lower sales at both its commercial and militaryoperations, 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-efficientplanes, but shares of both companies have suffered over the past fewmonths as investors worry that prolonged increases in oil prices willprompt a global recession.

Its shares, which have fallen 36 percent from their all-time high ayear ago, hurt by repeated delays on its new 787 Dreamliner and risingoil prices, fell a further 4 percent in premarket trading to $66.37.

"The real surprise of this quarter is the unusually soft performanceat commercial aircraft," Robert Stallard of Macquarie Securities saidin a note to clients. "However, there is nothing in this quarter whichwe view as a fundamental, long-term problem."

PROFIT DROP

Boeing, which beat archrival Airbus in the race for orders lastyear, reported second-quarter net profit of $852 million, or $1.16 pershare, 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 asurveillance plane the company is building for Australia, known asWedgetail. Boeing warned about the charge, which cut 22 cents offearnings 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 fororders last year, reported a 2 percent drop in revenue to $8.6 billion.It delivered more planes to customers in the quarter than a yearearlier, but delivered more of its less expensive, single-aisle 737sand fewer of its more lucrative 777 minijumbos.

The unit said it was also hurt by costs absorbed by other productionprograms due to the latest delay on its 787 Dreamliner, which is now atleast 14 months late after a succession of production problems.

Boeing said it was still having problems putting together the firstbatch of Dreamliners for testing, but stuck with its timetable forfirst flight in the fourth quarter and first delivery in the thirdquarter of 2009.

DEFENSE DOWN

Boeing’s defense unit also reported a slight drop in revenue to$7.93 billion due to fewer military aircraft deliveries and lower salesof its network and space systems. The Wedgetail charge lopped $248million 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 alsoheld to its 2009 forecast of $6.80 to $7.00 per share. Analysts expect$6.95, on average.

(Editing by John Wallace)