Boeing shakes off trade-war jitters as cash beats estimates

A Boeing 787-10 aircraft being built for Singapore Airlines (front) sits in the Final Assembly Area before a delivery ceremony of the first Boeing 787-10 Dreamliner at Boeing South Carolina in North Charleston, United States, March 25, 2018. — Reuters pic
A Boeing 787-10 aircraft being built for Airlines (front) sits in the Final Assembly Area before a delivery ceremony of the first Boeing 787-10 Dreamliner at Boeing South Carolina in North Charleston, United States, March 25, 2018. — Reuters pic

CHICAGO, April 25 — Boeing Co rose as better-than-expected cash and profit signalled that trade tensions haven’t yet hurt the largest US exporter’s plane-making business.

Free climbed to US$2.74 billion, the company said in a statement today. That topped the average analyst estimate of US$1.49 billion, a sign the company’s underlying business remains healthy. Boeing also raised its 2018 earnings forecast.

The robust results underscored the strengths that made Boeing the best performer on the Dow Jones Industrial Average for most of the past year. The company was recently dethroned by Cisco Systems Inc as President Donald Trump’s trade salvos rattled markets. Investors sold off Boeing as aluminium prices went on a wild ride, and again when threatened penalties for the 737, the manufacturer’s largest source of profit.

“Boeing appears a natural casualty in a trade war, as one of the most visible American exporters,” Robert Spingarn, an analyst at Group AG, said in a report Monday. “Most of the impact seems to be limited to the rather than the fundamentals.”

The shares advanced 2.6 per cent to US$337.48 before the start of trading in New York. Through yesterday, they had gained 12 per cent this year, while the Dow fell 2.8 per cent.

Adjusted earnings rose to US$3.64 a share, Chicago-based Boeing said in the statement. That was more than the US$2.58 average of estimates compiled by Bloomberg. Revenue increased 6.5 per cent to US$23.4 billion. Analysts had predicted US$22.2 billion.

Boeing raised its 2018 forecast for per-share adjusted earnings by 50 cents to a range of US$14.30 to US$14.50.

Production strains

There are signs of strain, however, as engine makers and other suppliers struggle to keep pace with the record production tempo for the single-aisle 737. Almost half of Boeing’s 184 jet deliveries in the quarter occurred in March, after a sluggish start. The company delivered 35 of the upgraded 737 Max in the quarter, nine fewer than Credit Suisse had expected.

Boeing has worked hard to improve productivity in its factories, while making good on pledges to increase cash flow and share the gains with shareholders. Deferred production costs for the 787 Dreamliner fell US$668 million to US$24.7 billion, freeing up cash.

The company’s commercial airplane and defence divisions made progress toward the mid-teen profit margins set by Boeing Chief Executive Officer Dennis Muilenburg, reporting operating margins of 11 per cent and 11.3 per cent, respectively. The measure declined slightly to 16.3 per cent for Boeing Global Services, a new division offering spare parts, maintenance and other services.

Boeing now expects its jetliner business to generate an operating margin of about 11.5 per cent for the year, compared with the estimate of more than 11 per cent. The company also raised its operating cash flow forecast to a range of US$15 billion to US$15.5 billion, from the previous forecast of US$15 billion.

Investors who have fixated on Boeing’s cash generation are starting to take a broader look at its production and market risks as the company plots its first all-new aircraft family since the carbon-composite 787, said Ken Herbert, an analyst with Canaccord Genuity.

As the launch of the new mid-range family approaches, “I think for a lot of people that will represent a shift in sentiment,” Herbert said in an interview before the earnings were released. “It will translate from a free cash flow story to more of a bet on the environment” in the broader market. — Bloomberg

Source: The Malay Mail Online

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