Boeing Boosts Profit Forecast After Strong Quarter -- 2nd Update

By Doug Cameron Features Dow Jones Newswires

Boeing Co. on Wednesday pledged bigger payouts to shareholders over the next several years as higher profit guidance drove its shares to a record.

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The world's largest aerospace company by sales is accelerating efforts to convert its near-$500 billion order book into cash and profits as it shakes off past problems such as the costly and delayed introduction of the 787 Dreamliner jet.

Boeing shares have climbed by almost 50% this year as investors become more confident that solid growth in global airline traffic will translate into more orders for jets made by Boeing and rival Airbus SE, which reports Thursday. The latest surge in Boeing's shares Wednesday made it the largest component in the Dow Jones Industrial Average.

Chicago-based Boeing plans to increase production of its 737 jetliner by 36% over the next three years, countering slower sales of its larger widebody planes. It is reducing expenses through a mix of job cuts and more efficient factories, while chasing a bigger share of the market for maintaining aircraft.

However, Boeing also needs its suppliers to keep pace with the production increase, even though some are uneasy with the switch to providing more of its own parts and services.

"There's some sense of nervousness and uncertainty as we ramp up," Chief Executive Dennis Muilenburg said. "There's going to be some places where we make some tough decisions, develop alternatives."

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His comments came as the company reported forecast-beating second-quarter profits and generated more than twice as much free cash as analysts expected, prompting a bump to planned stock buybacks and prepayment of big pension liabilities.

Free cash flow is expected to rise year on year through the end of the decade. Boeing plans to lift stock buybacks to $10 billion this year and will return all of its free cash to shareholders in the form of repurchases and dividends. The additional $3.5 billion pension payment in 2017 would cover expected funding needs over the next four years.

The buyback commitment pepped Boeing shares, which were recently up 8.4% at $230.35.

"The bulls would point to the stock being cheap, with a free cash flow yield in the high single digits, while other industrials trade in the mid-single digits," said Jeff Morris, head of U.S. equities at Standard Life Investments, a holder of Boeing stock.

Boeing reported quarterly profit of $1.76 billion, or $2.89 a share, swinging from a $234 million loss a year ago weighed by charges on its commercial and military programs.

It kept guidance for delivering 760 to 765 jetliners this year unchanged, and the order book rose to $482 billion.

The company now expects full-year adjusted earnings of $9.80 to $10 a share compared with previous guidance for $9.20 to $9.40 a share. Sales guidance was unchanged at $90.5 billion to $92.5 billion.

--Ezequiel Minaya contributed to this article.

Write to Doug Cameron at doug.cameron@wsj.com

(END) Dow Jones Newswires

July 26, 2017 13:32 ET (17:32 GMT)