Boeing Raises Forecast, Posts Profit After Shipping More Jets

Boeing Co., the world’s largest aerospace company, boosted its full-year earnings forecast and posted a third-quarter profit as it delivered more jetliners, recovering from delays caused by a supplier’s defective seats.

Net income was $837 million, or $1.12 a share, after a net loss a year earlier of $1.56 billion, or $2.23, Chicago-based Boeing said today. Profit beat 20 analysts’ average estimate of $1.07 in a Bloomberg survey.

Boeing shipped more 737s, as well as 777s after receiving replacements for the faulty seats, bolstering revenue from airlines. Higher production of those planes is countering delays on the 787 Dreamliner and 747-8 jumbo jet, two programs that forced $3.5 billion in charges a year ago and led Boeing to its biggest loss since at least 1983.

“Orders are doing very well, there’s good demand out there and Boeing is executing on the commercial side,” said Troy Lahr, an analyst at Stifel Nicolaus in Baltimore who recommends buying Boeing stock. “They still need to get through the development programs, the 787 and 747-8, but all in all it looks like they’re heading in the right direction.”

2010 Jet Deliveries

Full-year earnings will more than double to as much as $4 a share, 20 cents higher than the previous maximum forecast, Boeing said. The company said it will deliver 460 planes this year, the lower end of its forecast range, and decreased its top sales projection by $500 million to $65.5 billion. Boeing said revenue will gain further next year.

Photographer: Kevin P. Casey/Bloomberg

The company repeated today that the 747-8, seen here, will be delivered to the first customer in mid-2011. Close

The company repeated today that the 747-8, seen here, will be delivered to the first... Read More

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Photographer: Kevin P. Casey/Bloomberg

The company repeated today that the 747-8, seen here, will be delivered to the first customer in mid-2011.

Boeing rose $2.31, or 3.3 percent, to $71.36 at 4:01 p.m. in New York Stock Exchange composite trading. The shares have gained 32 percent this year before today, making Boeing the third-best performer on the Dow Jones Industrial Average.

Sales increased 1.7 percent to $17 billion in the quarter, topping analysts’ $16.8 billion prediction.

Operating cash flow was $1.9 billion and will be more than $1.5 billion for the year, rather than zero as previously predicted, Boeing said. Cash flow will exceed $4 billion in 2011, coming in under the prior forecast of more than $5 billion, the planemaker said.

Defense Unit

“Operationally, they did very well at the commercial- aircraft business, and some of that is offsetting the weakness at the defense business, which has been concerning investors,” Lahr said.

Boeing cut its projection for the defense unit’s operating margin by 0.5 percentage point to 9 percent. The margin for the division, which generates almost half of the company’s revenue, narrowed to 8.4 percent last quarter because of lower pricing.

The company is turning to foreign military sales for growth as the Pentagon scales back spending. Chief Executive Officer Jim McNerney said he’ll continue to cut jobs at the unit.

Demand for the best-selling 737 and most-profitable 777 helped avert an extra charge last month after a year-long delay on the 747-8 was extended by six months so engineers could redesign part of the plane, the biggest Boeing has built.

McNerney repeated on a conference call today that he’s confident the 747-8 will be delivered to the first customer in mid-2011, and the plastic-composite 787 Dreamliner will enter service in the first quarter of 2011, almost three years late.

Rolls-Royce Engine

Rolls-Royce Group Plc, one of two companies building engines for the 787, is submitting new data to regulators to prove that modifications to software and hardware are enough to address a so-called uncontained engine failure, McNerney said.

The Aug. 2 engine blowout at Rolls-Royce’s test site in Derby, England, flung debris out at high speed, piercing the housing of the device. The company shuttered the plant for repairs, and Boeing announced a sixth delay to the Dreamliner’s first delivery later that month.

“If they say they’re confident and have the fix in hand, then I believe them,” McNerney said today.

Once the 787 and 747-8 are certified, Boeing will have the capacity to make improvements to the 777 this decade and develop a replacement for the 737 “in the 2020 range,” McNerney said. The company is also still studying the possibility of a new engine, as well as options to improve the 737, he said.

Boeing’s net orders through September came to 392, eclipsing all of last year’s orders as well as larger rival Airbus SAS’s tally of 328. McNerney said full-year orders will surpass the target of 460 deliveries amid a “slow, steady kind of recovery.”

The commercial backlog grew 2.9 percent from the end of June to 3,401 jets valued at $255 billion.

Order Recovery

Airlines are ordering more fuel-efficient planes as they come out of the recession-induced travel slump, and McNerney said Boeing is starting to see an increase in discretionary spending for upgrades. Orders may take longer to recover than in previous cycles, he said.

The company raised its forecast for the commercial unit’s operating margin by 1 percentage point from the top of the previous range, to 9.5 percent. The unit’s third-quarter operating profit advanced to 11.6 percent of sales as it delivered more of the pricier 777s.

To contact the reporter on this story: Susanna Ray in Seattle at sray7@bloomberg.net.

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net.

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