Boeing 2Q net income up, surprises Wall Street

Boeing 2Q net income up, surprises Wall Street

Credit: AFP/Getty Images

A Boeing 787 Dreamliner aircraft is pictured at the Farnborough International Airshow in Hampshire, southern England, on July 9, 2012. Boeing was set to steal a march over European rival Airbus at the Farnborough airshow which began on Monday, with the US planemaker expected to secure big orders for its new 737 MAX jet. AFP PHOTO / ADRIAN DENNIS (Photo credit should read ADRIAN DENNIS/AFP/GettyImages)


by KING 5 News and Associated Press

Posted on July 25, 2012 at 8:24 AM

Updated Wednesday, Jul 25 at 10:18 AM

NEW YORK  -- Boeing Co. surprised Wall Street with a 3 percent improvement in second-quarter net income Wednesday on strong sales of commercial airplanes. The company raised its earnings forecast for the year.

The results announced before the markets opened eased investors' fears of an imminent slowdown in the company's defense unit, which produces Chinook helicopters and F-18s among many other aircraft models. They also highlighted strong growth in the company's commercial airplane unit which has been rapidly increasing the pace of production for some planes to meet demand.

Boeing, based in Chicago, reported net income of $967 million, or $1.27 per share, for the April-June period compared with $941 million, or $1.25 per share, a year earlier.

Revenue jumped 21 percent to $20 billion from $16.54 billion a year ago.

Analysts polled by FactSet expected earnings of $1.13 per share on revenue of $19.28 billion.
Boeing says passenger demand for travel continues to grow worldwide and, after declines, the market for air shipments of cargo is finally stabilizing.

The company says one of its strengths is the worldwide distribution of its $347 billion backlog of jets. Two-thirds of the demand for new jets is outside of the U.S. and the economically troubled Eurozone.

“The world is a fragile one economically,” said Boeing CEO Jim McNerney.

“People view this as a quick payback investment…independent of overall GDP growth,” McNerney added on why airlines continue to sell strongly.

Defense revenue rose 7 percent, while revenue in the commercial airplane division jumped 34 percent. The divisions are roughly the same size, but some observers fear they will go in opposite directions.

Boeing's defense unit is vulnerable to potentially severe military spending cuts in January. The cuts would be automatic unless Congress agrees to an alternative for cutting the deficit. The military would face $492 billion in cuts over a decade, with domestic spending reduced by another $492 billion over 10 years.

But it's clear the unit is still holding strong. The second-quarter revenue growth is about the same as Boeing saw in the first three months of the year. Defense contractor Lockheed Martin had reported second-quarter results that surprised Wall Street earlier.

Boeing's commercial airplane unit, meanwhile, is speeding production and deliveries of its new 787. That will move planes that have been mostly finished, but undelivered, out of inventory and turn them into cash. Boeing is also booking firm orders for its new 737 Max, a redesigned version of its classic 737.

Higher costs somewhat overshadowed strong results in both segments. Total expenses rose 30 percent in the spring quarter.

Questions over the status of the troubled 787 continued to dominate Wednesday’s conference call with financial analysts and journalists. A total of 11 787s were delivered Japan’s All Nippon Airways and Japan Airlines. The company expects to deliver between 35 and 40 787s in 2012, with about half of those jets going directly from the factory to the flight line with few problems, and the other half coming from a special facility at Everett’s Paine Field which is making modifications to 787s build earlier.

A recent problem with five in-service ANA jets grounded earlier this week with engine gearbox issues is mostly resolved. McNerney announced that four of those jets are fixed and back up flying and that any changes in production will have no impact to the schedule.

For all of 2012, Boeing Co. now expects to earn $4.40 to $4.60 per share, up from between $4.15 and $4.35. Still, that new forecast is mostly under what Wall Street is banking on. Analysts predict $4.57 per share, on average.

Boeing shares rose 95 cents to $72.98 in morning trading.

KING 5's Glenn Farley and Associated Press contributed to this report.