Boeing Presses to Meet Demand -- WSJ

By Doug Cameron Features Dow Jones Newswires

Plane maker had record deliveries in latest quarter, but orders keep piling up

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This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (October 26, 2017).

Boeing Co. said Wednesday that demand for its single-aisle jets could merit a further rise in production beyond the 35% increase already envisaged by the end of the decade.

Higher output of its 737 jets and the improved profitability of its 787 twin-aisle planes have helped Boeing's share price almost double over the past year, as the company channeled most of the extra cash to shareholders in the form of buybacks and increased dividends.

Boeing Chief Executive Dennis Muilenburg said the 737 was already sold out until the end of the decade, and there was pressure from customers to boost monthly output beyond the 57 jets envisioned in 2019. Boeing recently boosted output by five jets to 47 a month and plans to add another five to the rate next year.

The bullish outlook came as Boeing reported forecast-beating quarterly earnings and gave a modest boost to its profit and cash-flow guidance for the year. However, its shares declined as the company booked another charge on its military-tanker program and offered few details on how it plans to reach aggressive targets it has set for its services business.

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Boeing has orders for 5,700 commercial jets representing seven years of output at planned production rates. Rapid growth in passenger and freight traffic, especially in developing markets, has fueled optimism that the longstanding boom-and-bust cycles of the jet industry are smoothing.

One market Boeing isn't focusing on is for smaller jets seating 100 to 150 passengers, a segment targeted by a planned partnership between Airbus SE and Bombardier Inc.

"Recent changes in the marketplace, discussions between Airbus and Bombardier, don't change our plans," Mr. Muilenburg said on a quarterly call.

He continued to rail against consolidation elsewhere in the aerospace industry, notably the planned combination between United Technologies Corp. and Rockwell Collins Inc. announced last month.

"Until proven otherwise, we remain skeptical," he said of a deal that would unite two of Boeing's largest suppliers, potentially reducing its own leverage to cut its costs and boost profit margins.

Boeing in July created a separate services unit, projecting sales this year as high as $14.5 billion and margins of as much as 15.5%, well ahead of its core plane-making and defense units. The company aims to double its market share of selling spares and services and boost revenue from the business to $50 billion over the next several years.

The company on Wednesday said the unit had $3.6 billion in sales in the third quarter, little changed from a year earlier, but provided no further update on plans for the business.

The push into services has irked many Boeing suppliers, who rely on the segment for their profits. United Technologies revealed Tuesday that it doesn't make any money on new parts sold to Boeing, just on spares.

Boeing said profit for the third quarter fell to $1.85 billion from $2.28 billion in the year-earlier period, which included a large tax gain. The latest quarter included $329 million in extra costs for the KC-46A Pegasus refueling tanker, adding to the roughly $1.5 billion in charges already booked for the program.

Per-share earnings declined to $3.06 from $3.60 but were $2.72 after stripping out certain pension items, 6 cents ahead of consensus estimates. That marked the sixth quarter in a row Boeing outpaced expectations as it tallied a record 202 commercial-airliner deliveries in the period. Sales rose 2% to $24.3 billion.

The company also added 10 cents a share to the midpoint of its full-year profit guidance and another $250 million in operating cash flow.

In afternoon trading, Boeing shares were down 3.5% at $256.66.

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

(END) Dow Jones Newswires

October 26, 2017 02:48 ET (06:48 GMT)