Chicago-based Boeing Co. raised its full-year profit forecast as the world's biggest planemaker reaps gains from faster production that is driving jetliner deliveries to record levels.
Earnings for 2014 excluding some pension expenses will be in a range of $7.90 to $8.10 a share, Chicago-based Boeing said today, compared with a previous projection for $7.15 to $7.35. Second-quarter profit on that basis of $2.42 a share beat the $1.98 average of 20 analysts' estimates compiled by Bloomberg.
The results may ease concern that the aerospace industry is entering a slump, as Boeing's shares trail broader U.S. indexes this year even after handing over 181 aircraft last quarter. Investors are overlooking global air-travel growth and demand for new jets, Douglas Harned, a Sanford C. Bernstein & Co. analyst in New York, told clients yesterday in a note.
"This is not what overcapacity looks like," said Harned, whose outperform rating is the equivalent of a buy. "The strong demand is also consistent with low deferral requests for Boeing and Airbus deliveries."
Boeing rose 2.3 percent to $132.75 at 7:33 a.m. before regular New York trading. The stock fell 4.9 percent this year through yesterday, the second-biggest drop among the 30 companies on the Dow Jones Industrial Average.
Sales rose 1 percent to $22 billion, Boeing said. The quarterly results included a cost of $272 million, or 37 cents a share, related to development work on the KC-46A tanker for the U.S. military, Boeing said. The company also had two tax-related gains totaling $116 million that had been previously announced, as well as a $408 million benefit disclosed today.
Boeing is benefiting as its factories churn out 737, 777 and 787 aircraft at the fastest pace ever amid an order backlog shared with Europe's Airbus Group NV that's valued at about $1 trillion.
While Boeing still loses money on every Dreamliner it assembles, losses are shrinking as it smoothes out production kinks and takes advantage of supplier discounts that took effect earlier this year, Harned wrote.
Investors are tracking how the supplier agreements affect the 787's deferred production cost, an accounting measure that is supposed to drop as the assembly expense declines with a projected gain in efficiency. Boeing estimated a ceiling of $25 billion last year, up from a previous forecast of $20 billion.
"We're particularly bullish about the prospect for material declines in the growth of deferred production costs," Carter Copeland, a New York-based analyst for Barclays Plc, said in a July 21 report.
One blemish for Boeing's commercial aircraft unit was the two 747-8 deliveries reported during the period, the weakest showing on record for the iconic, humpbacked jumbo jet, said Yair Reiner, a New York-based analyst with Oppenheimer & Co., in a July 6 report.
"No warm and fuzzies there," wrote Reiner, whose rating on Boeing is the equivalent of hold. Copeland's overweight recommendation is the equivalent of buy.
To contact the reporter on this story: Julie Johnsson in Chicago at jjohnssonbloomberg.net To contact the editors responsible for this story: Ed Dufner at edufnerbloomberg.net Benedikt Kammel