April 25 (Bloomberg) -- Boeing Co., the world's second- largest maker of commercial airplanes, said first-quarter profit surged 27 percent as rising sales of the 737 jet pushed the company closer to overtaking Airbus SAS.

Net income climbed to $877 million, or $1.13 a share, from $692 million, or 88 cents, a year earlier, beating analysts' estimates. Sales advanced 7.7 percent to $15.4 billion, the Chicago-based company said today in a statement.

Boeing increased shipments of the 737, its best-selling model, by 15 percent on orders from Azerbaijan Airlines and Singapore Aircraft Leasing Enterprise. Deliveries climbed 8.2 percent, and Boeing reported record orders after Airbus delayed its super-jumbo A380 plane by two years because of faulty wiring.

``I don't know how you beat this quarter,'' said Paul Nisbet, a Newport, Rhode Island-based analyst with JSA Research Inc., in an interview. He has a ``buy'' rating on the stock.

Boeing affirmed its 2007 profit forecast of $4.55 to $4.75 a share. Analysts, on average, estimate $4.81. The company has projected sales this year of $64.5 billion to $65 billion.

Shares of Boeing, also the second-largest defense contractor, rose $1.02, or 1.1 percent, to $94.69 at 4 p.m. in New York Stock Exchange composite trading. They have gained 11 percent in the past year.

Sales at Boeing's defense unit grew 7 percent to $7.7 billion, including $1.58 billion for support systems, logistics and maintenance work for the U.S. military. The division's backlog totaled $73.6 billion at the end of the quarter. Defense sales in the Precision Engagement and Mobility Systems division rose 6 percent to $3.3 billion on higher deliveries of the F/A-18 jet fighter and Chinook helicopter.

Analyst Estimates

The average of 12 analyst estimates compiled by Bloomberg was for profit of $1.06 a share in the quarter. Sales were projected at $15 billion.

Chief Executive Officer James McNerney sped up manufacturing lines to produce four more of the 737s than in the fourth quarter. Since 1997, Boeing has cut the production time for a 737 in half, now taking only 11 days to build one.

Boeing booked orders for 185 commercial planes last quarter, beating Airbus by 51, and began construction on its fuel- efficient 787 Dreamliner. That model surpassed 500 orders during the period, making it the company's most successful aircraft introduction ever.

Airbus's answer to the 787, the A350, will enter service five years after the 787 begins carrying passengers next year. McNerney said plans to modify Boeing's wide-bodied 777 aircraft will depend, in part, on what Airbus does.

Research and Development

``We'll wait to see what the A350 is or isn't before we see what the response should be,'' he said during a conference call with analysts and investors.

The operating profit margin at Boeing's commercial airplanes unit narrowed to 9.3 percent from 10 percent a year earlier on a $258 million increase in research and development spending. The company forecast its full-year margin will exceed 10 percent. The company also reiterated its 2007 projection for R&D spending of between $3.2 billion and $3.4 billion.

Boeing will probably see a ``new wave of orders'' from legacy carriers that have so far been absent from the recent round of airplane contracts, wrote Robert Toomey, chief equity strategist for Seattle-based E.K. Riley Investments, in a note to investors on April 12. He rates the stock ``hold.''

``We believe Boeing is aware of this and has the ability to accommodate new orders from legacy carriers through production rate increases, which we expect, particularly for the 737, later this year,'' Toomey wrote.

Air Canada

Yesterday, Boeing received orders valued at $6.3 billion from Air Canada and Virgin Atlantic Airways Ltd. for the Dreamliner.

Air Canada, the country's largest airline, plans to buy 23 of the aircraft costing $3.5 billion at list prices, bringing the carrier's total order for the model to 37. Virgin Atlantic, the U.K. airline controlled by billionaire Richard Branson, placed an order for 15 of the 787-9 version valued at $2.8 billion.

Boeing's financing division increased pretax earnings to $73 million, from $70 million a year ago, and contributed $173 million in cash to the company during the quarter.

The company announced it spent $360 million in the quarter to repurchase about 4 million shares.

Lockheed Martin Corp. is the world's largest defense company.

To contact the reporters on this story: Jon Steinman in Washington at jsteinman@bloomberg.net; James Gunsalus in Seattle at jgunsalus@bloomberg.net.

Last Updated: April 25, 2007 16:13 EDT