By Jon Ostrower
Boeing Co. reported a 19% jump in quarterly profit, beating
expectations, and executives predicted that orders for its
fuel-efficient jets will remain strong in 2015 despite concerns
that falling oil prices could hamper demand.
The aerospace giant on Wednesday said it expects to deliver
between 750 and 755 commercial jetliners in 2015, another industry
record that could put it on pace to beat rival Airbus Group NV for
the fourth year. Boeing Chief Executive Jim McNerney said the
company also expects its order book this year to grow faster than
it can build jets, increasing a backlog of jetliner orders that
already stands at $440 billion based on list prices.
Boeing also gave some disappointing news, saying that
manufacturing costs for its advanced 787 Dreamliners continued to
climb faster than forecast. It said it expects to post "core"
earnings, excluding part of its pension expenses driven by market
volatility, of $8.20 to $8.40 a share for 2015, compared with $8.60
reported for 2014.
But Boeing's revenue guidance of $94.5 billion to $96.5 billion
for 2015 topped expectations for $93.25 billion, indicating
expectations of strong growth from the $90.76 billion reported for
2014. And Boeing projected a healthy increase in cash flow, a
measure of financial performance closely watched by analysts.
Investors cheered the results and outlook, sending Boeing shares
up more than 6% in early afternoon trading to $140.77 each--one of
the stock's biggest jumps in years. The shares closed up $5.4% at
$139.64.
With oil prices at the lowest levels since 2009, analysts have
cautioned that new jet orders may be delayed as older
less-efficient airplanes are less expensive to operate and stay in
service longer. Mr. McNerney said cheaper fuel is beneficial to
airlines and Boeing's long-term growth prospects. He added airline
fleet planning schedules have "not substantially changed" as a
result of the oil prices.
Boeing's commercial business had a record 2014, delivering 726
commercial jetliners in 2014 and 195 in the fourth quarter, which
helped it generate $90.8 billion in revenue last year and $24.5
billion in the quarter, up 3%.
The company announced in December it would lift its stock
buyback by $2 billion to $12 billion and increase its dividend
25%.
For the fourth quarter, Boeing reported profit of $1.47 billion,
or $2.02 a share, up 19% from $1.23 billion, or $1.61 a share, a
year earlier. Core earnings, and a metric closely watched by
analysts, rose to $2.31 from $1.88.
But revenue at the defense, space and security division fell 14%
to $7.59 billion. Boeing is restructuring the defense unit to
counter military budget pressures and compete for a number of
coming Pentagon competitions, including a new bomber. Mr. McNerney
suggested that its St. Louis jet fighter plant might be home to the
new $80 billion U.S. Air Force bomber program. Boeing is bidding
for the deal in partnership with Lockheed Martin Corp., and faces
competition from Northrop Grumman Corp. A winner is expected to be
announced this summer.
Boeing's Dreamliner has been a sales success, drawing more than
1,000 orders since its first orders in 2004. Mr. McNerney said he
expects orders to increase late in 2015 as it gets closer to
available delivery dates.
But the Dreamliner has proved stubbornly expensive to make--on
top of years of delays--with each jet costing more to build than
Boeing can sell it for. The program has accumulated $26.15 billion
in such losses over 228 deliveries, the company said, increasing
around $1 billion during the quarter and exceeding even the largest
estimates of around $800 million. Boeing expected those losses,
known as deferred production costs, to top out around $25 billion,
and now is signaling they could rise to around $28 billion.
Chief Financial Officer Greg Smith attributed the
higher-than-expected costs to delayed contract renegotiations with
suppliers as they master production, as well as to increased labor
costs to introduce the new, longer 787-9 Dreamliner model into its
factories and to investments that will improve productivity over
the long term.
Mr. Smith said those per-unit losses would continue through the
next nine months and maintained that the program would break even
on each delivery by the end of 2015. Those losses will begin to
reverse in 2016 when the company boosts Dreamliner output to 12
jets each month.
Boeing's accounting system enables it to spread the high early
costs of the program over its expected average costs and revenues
across 1,300 deliveries. By its own measures, the flagship
long-range jet program is profitable and contributing to its
quarterly earnings.
Chelsey Dulaney and Doug Cameron contributed to this article
Write to Jon Ostrower at jon.ostrower@wsj.com
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