Story URL: http://news.medill.northwestern.edu/chicago/news.aspx?id=113311
Story Retrieval Date: 5/25/2013 8:36:23 AM CST
Boeing Co. lowered its guidance Wednesday after announcing its quarterly net income swung to a $56 million loss from a profit of $1 billion last year, revealing the impact of a now-resolved machinists’ strike on commercial airplane deliveries and an ever-increasing backlog of orders. The loss failed to meet analysts’ expectations.
The Chicago-based commercial and military aircraft manufacturer’s earnings equaled a loss of 8 cents per diluted share in the fourth quarter ended Dec. 31, compared with a profit of $1.35 in the year-earlier period. Analysts polled by Zacks Investment Research Inc. were on average looking for a profit of 79 cents per share.
Sales dropped 27 percent to $12.7 billion from $17.5 billion.
Boeing lowered its full-year guidance to a range of $5.05 to $5.35 per diluted share. Previously the company’s guidance was a range of $6.80 to $7.00. Analysts forecast $5.79 on average, according to Zacks. The company reported $3.71 in earnings per share for 2008.
In an effort to control costs in a flagging economy, Boeing more than doubled its projected job cuts to 10,000 by the end of the year, up from the 4,500 announced earlier this month. Spokesman Todd Belcher said the cuts will be spread across all divisions, including commercial airplane manufacturing, integrated defense systems – which includes military aircraft manufacturing, and support staff.
Chairman of the Board, President and CEO Jim McNerney acknowledged in a conference call that 2008 was a “challenging” year for his company.
One of the biggest challenges was a 58-day walkout by 27,000 employees represented by the International Association of Machinists and Aerospace Workers. The union members returned to work Nov. 2 after Boeing agreed to raise wages and pensions.
Boeing estimated that the strike reduced its quarterly airplane deliveries by about 70 units and led to a revenue drop of $4.3 billion, or 48 percent, in its Commercial Airplanes division, compared with the same period the previous year. Full-year deliveries for the division fell by an estimated 105 planes, although Boeing added 669 orders for the year. The company estimates its total backlog is a record $352 billion.
“We knew it was going to be a tough quarter due to the IAMAW strike,” said Peter Arment, an analyst with American Technology Research.
Arment said the job cuts will allow Boeing to decrease its production to meet smaller orders as airlines continue to slash their capacity during an economic downturn.
“Boeing has been here before and dealt with cyclical markets,” Arment said. He has assigned the company a neutral rating. Boeing declined to submit a 2010 forecast, citing uncertain market conditions.
In the full year Boeing earned $2.7 billion, or $3.71 per diluted share, down from $4.1 billion, or $5.28 per diluted share. Revenue fell 8 percent to $60.9 billion from $66.4 billion.
Shares of Boeing closed at $43.24 Wednesday, up 2 cents.