Boeing 3Q profit up 31 pct; cuts delivery forecast

AP News
Posted: Oct 26, 2011 6:39 PM
Boeing 3Q profit up 31 pct; cuts delivery forecast

Boeing reported a $1.1 billion third-quarter profit Wednesday that beat expectations because of strong growth in its defense business.

Boeing's revenue is split between defense and commercial airplanes. It benefits from having one foot in civilian aerospace and one in government-funded military contracts. When there's a downturn in one, the company still has a shot at profits in the other. Weapons demand in the Middle East and South Asia is helping to offset flat to potentially lower defense spending in the U.S., said Jim McNerney, Boeing's chairman and CEO.

Meanwhile, profits from Boeing's passenger jet business grew, although more slowly. It also cut its forecast for deliveries of its two newest jets, including the much-anticipated 787.

Boeing's overall net income rose 31 percent. Profit of $1.46 per share beat analyst expectations, while revenue rose 4 percent to $17.73 billion.

Boeing's defense division generated operating earnings of $824 million, up 20 percent. Profits for military aircraft, computer and space systems, and defense services all rose. Boeing makes the CH-47 Chinook transport helicopter, the AH-64 Apache attack helicopter, and the F/A-18 Hornet fighter.

Defense contractors Lockheed Martin Corp. and Northrop Grumman Corp. also reported strong third-quarter earnings Wednesday. Executives at those companies also said future defense spending is likely to be flat.

Earnings at Boeing Commercial Airplanes rose 7 percent to $1.09 billion.

Boeing is trying to get its 787 production up to speed after years of delays. It said it will now deliver 15 to 20 of its new 787s and 747-8s this year. But that is 10 fewer than previously expected. Of those, no more than seven will be 787s, which are built of lightweight materials that promise to dramatically improve fuel efficiency. Boeing said it is taking longer than expected to rework the first 787s, called Dreamliners, to fix early production problems.

The 747-8 is a new version of Boeing's iconic superjumbo jet that is longer and can carry more cargo and passengers. Boeing has delivered a cargo version and plans to deliver a passenger version next year

The Dreamliner finally carried its first passengers Wednesday. Japan's All Nippon Airways took travelers on a four-hour flight from Tokyo to Hong Kong.

The jet has a list price of $193 million, but production delays mean that early models are costing Boeing more to make than they bring in. The shortfall will begin to close around the time Boeing makes 10 per month, said James Bell, Boeing's president and chief financial officer.

Boeing said it will spread out production costs over the first 1,100 planes it makes.

Boeing said it expects to take about 10 years to make those 1,100 planes. It plans to reach 10 per month by 2013, a faster rate than anyone has ever built such a large plane before. It is now accelerating assembly to 2.5 per month.

Boeing raised its full-year forecast to $4.30 to $4.40 per share from $3.90 to $4.10 per share.

Boeing shares rose $2.84, or 4.5 percent, to close at $66.56.