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Despite 787 delays, Boeing shares rise on earnings gain

by Jason M. Breslow
April 23, 2008

Improved deliveries helped Boeing Co. beat analyst forecasts with a 38 percent earnings gain for the first quarter, despite delays with the Chicago-based company’s 787 Dreamliner program. The gain, along with a healthy outlook by the company for 2009, pushed shares up $3.53 or 4.5 percent to $82.09.

Boeing, the world’s second-largest aircraft maker, earned $1.21 billion, or $1.62 per diluted share, in the quarter ended March 31, compared with a gain of $877 million, or $1.13 per diluted share, in the year-earlier period. Diluted earnings per share from continuing operations increased to $1.61 from $1.12, exceeding the analysts' forecast of $1.35 compiled by Zacks Investment Research Inc. 

“We’re off to a good start in what we expect to be another strong year of financial performance for Boeing,” said Jim McNerney, chairman, president and chief executive officer.

Boeing’s margin was helped by a 4 percent gain in revenues, to $15.9 billion from $15.3 billion, coupled with a 13 percent cut in research and development spending. The company’s commercial airplane division accounted for 51 percent of revenues; its defense sector brought in 47 percent.

Boeing “reported excellent first-quarter results,” wrote Brian Nelson, an analyst with Morningstar Inc., in a research note. Nelson, who gives Boeing a four-out-of-five-star rating, added that “despite credit market turmoil and a slowing domestic economy, the current upswing in commercial airplane deliveries should continue through at least the end of the decade.”

The company delivered 115 commercial aircraft in the first quarter of 2008, nine more than it did during the same period last year. The value of its total backlog of orders increased to $346 billion.

A significant portion of the backlog -- approximately $154 billion -- comes from Boeing’s 787 program.

Boeing has already taken 892 orders for its new 787, a lightweight twin-engine aircraft made largely from composite materials, rather than aluminum. On April 9, however, the company announced that for the third time in six months it was delaying the 787. The revised schedule pushed the delivery schedule for the aircraft to the third quarter of 2009, at least 14 months later than originally planned.

In addressing the troubled program, McNerney said “we are methodically working through our challenges, including the start-up of the 787 program, and our people remain focused on satisfying our customers and leveraging growth and productivity into better bottom-line and top-line performance for our company.”

Jon Ostrower, who writes the popular Flight Blogger blog for Flight International magazine, said he thinks it is smart that Boeing opted to take a more conservative approach to the 787 program.

“When you look at the size of the backlog … it’s not going to affect the overall health of the program,” Ostrower said. Within two years, he added, Boeing will have sold 1,000 of the aircraft.

“You can’t beat that number anywhere,” he said.

Boeing also used Wednesday’s announcement to reaffirm its earlier guidance that 2008 earnings per diluted share will finish somewhere between $5.70 and $5.85. Last year the company earned $5.28 per diluted share.

For 2009, the company said, it expects earnings per share to land between $6.80 and $7.00. Analysis polled by Zacks Investment Research predict Boeing’s earnings per share will increase to $6.92 next year.