Business

July 24, 2013

Boeing second quarter profit tops expectations despite 787

Joshua Freed
Associated Press

Boeing’s problems with its 787 have made headlines, but they haven’t hurt profits.

It posted a bigger-than-expected second-quarter profit as it ramped up deliveries of commercial planes like its 737 and its 777.

Boeing is in the midst of a boom in airplane orders as airlines in Asia and Latin America expand. It is speeding up production of its 737 as well as the new 787, known as the Dreamliner. Deliveries of all commercial planes rose 13 percent to 169 planes during the quarter.

Deliveries of the 787 were temporarily halted in January when the plane was grounded because of battery problems. But they resumed in May and Boeing delivered 16 of the jets during the quarter. It still expects to deliver at least 60 of the 787s this year ├│ the same goal it had before the battery problems surfaced.

Boeing’s net income rose 13 percent to $1.09 billion, or $1.41 per share. During the same period last year it earned $967 million, or $1.27 per share. Revenue rose 9 percent to $21.82 billion.

The results include costs from pensions. On that basis, analysts surveyed by FactSet had been expecting a profit of $1.30 per share with revenue of $20.79 billion.

Boeing said that it has finished paying airline customers who had to stop flying their 787s because of the grounding. Boeing didn’t say how much it spent, but it wasn’t enough to show up in the company’s financial results released July 24.

Fifty 787s were grounded for almost four months because of problems with their batteries. Several airlines said they wanted compensation. Airlines have to keep making payments on planes whether they’re flying or not. The Polish government has said the grounding cost LOT Polish Airlines more than $30 million in lost flights alone.

“There were some instances where we had obligations to customers, and those have all been satisfied,” Chairman and CEO Jim McNerney said on a conference call. “We think they are all behind us now,” he added.

He also said Boeing is discussing with Ethiopian Airlines the method for repairing a 787 that caught fire while parked at London’s Heathrow airport on July 12. The fire appeared to burn through the outside skin of the plane’s tail, suggesting that an extensive repair will be needed.

Boeing raised its full-year profit guidance to $6.20 to $6.40 per share ├│ a dime higher than its old guidance. Once it pays for pension expenses it will earn $5.10 to $5.30 per share. On that basis, analysts are expecting $5.34 per share.

The company now expects revenue of $83 billion to $86 billion, which is $1 billion more than it previously predicted. Analysts were expecting $84 billion.

Revenue from commercial planes rose 15 percent to $13.62 billion, and profits in that segment jumped 20 percent to $1.45 billion. The 787s actually hurt profit margins because they cost more to build than Boeing is collecting, but delivering the planes brings in more revenue.

Things are slower at Boeing’s defense arm. Revenue there was flat at about $8.19 billion, although operating profits rose 4 percent to $776 million. Boeing and other defense contractors have had to cope with the automatic federal spending cuts that took effect in the spring.




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