Boeing Surprises Wall Street with Better-Than-Expected Earnings

By Arionne Nettles

Boeing Co. posted a better-than-expected 25 percent increase in third quarter earnings as improvements in production led to a jump in commercial airplane deliveries.

The Chicago-based aerospace company posted net earnings of $1.70 billion, or $2.47 per diluted share for the fiscal quarter ended Sept. 30, up from $1.36 billion, or $1.86 per share, in the year-ago period. The results were well above the analysts’ consensus estimate of $2.17 per share.

Quarterly revenue increased 9 percent to $25.85 billion from $23.78 billion in the prior year, also above Wall Street expectations.

 

Screenshot 2015-10-21 15.28.34

“We generated solid revenue growth and healthy operating margins across while generating significant cash flow,” said Gregory Smith, Boeing’s chief financial officer, on Wednesday’s earnings conference call.

Higher operating performance contributed to Boeing’s earnings surprise, including a jump in orders, a record number of commercial airplane deliveries, delivery expansion to China, and faster production rates. Improvements in the company’s supply chain operations, and communication with suppliers, are helping the company make planes more quickly.

Commercial airplane deliveries rose 7 percent to 199, which the company said was a record. The order backlog totaled $485 billion at the end of the quarter, including 5,700 commercial airplane orders.

Boeing also made strides in acquiring new business for its defense, space, and security sector with a revenue increase of 6 percent to $8.35 billion, compared to $7.91 billion in the prior year. It was awarded a contract for 13 P-8 Poseidon aircraft, a five-year extension for the International Space Station, and contracts for 37 rotorcraft in India. It also completed its first international V-22 sale to Japan.

The company raised its expected revenue for all of 2015 by $500 million to a range of $95.0 billion to $97.0 billion, compared with a previous guidance of $94.5 billion to $96.5 billion. In 2014, Boeing had revenue of $90.76 billion.

Despite the higher forecast for revenue, some analysts said they expect demand to slow.

“Orders have expanded at a fast pace coming out of the downturn, but order growth may now be harder to come by as Boeing announces fewer new programs and competition heats up,” said Jeff Windau, Edward Jones equity analyst in a research note. “Historically, Boeing’s stock price tends to move with order growth, so a slowdown in orders could have an impact.”

The stock closed Wednesday at $141.19, up 1.7 percent.

Photo at top: Boeing attributed its third quarter earnings surprise to better operations, especially in manufacturing versions of its 787 airplane. (Boeing Co.)