Boeing Offers Upbeat 2018 Outlook

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Boeing Co. on Wednesday forecast a big rise in cash generated by record jetliner deliveries alongside a higher profit margin as the world's largest aerospace company by sales handily beat analysts' expectations.

The company said rising jetliner sales will push its operating cash up to $15 billion this year from $13.3 billion. Boeing and rival Airbus SE have backlogs stretching ahead for six or seven years, and investors are increasingly focused on deliveries and cash flow rather than new plane deals, analysts said.

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The company forecast sales climbing to between $96 billion and $98 billion, with deliveries of commercial jetliners rising to between 810 and 815 from 763 last year.

Per-share earnings in 2018 are forecast at between $15.90 and $16.10; with core profits excluding certain items such as pension costs at $13.80 to $14.00. That includes the benefit of a lower tax rate. Boeing didn't detail any changes to its capital-allocation strategy.

Profit in the fourth quarter rose to $3.13 billion from $1.6 billion a year earlier. Adjusted for one-off items and excluding pension costs, earnings climbed to $4.80 per share from $2.47. Sales rose 9% to $25.4 billion.

The U.S. company delivered a record 763 jetliners in 2017 and secured net orders for 912 planes, as surging airline traffic continues to fuel a multiyear boom for the airline and aerospace industries. The increased orders and deliveries highlight Boeing's ability to boost production while introducing new aircraft models, trends that have improved the aerospace giant's cash flow and profits and sent its stock to new highs.

Boeing has helped drive the benchmark Dow Jones Industrial Index with an index-leading rise of 14.5% so far this year, even after falling in each of the past three sessions.

The shares closed Tuesday at $337.71.

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

Boeing Co. said it boosted capital spending plans in the wake of U.S. tax reform, and will invest some of the windfall in productivity gains that are generating record profits and cash flow.

The world's largest aerospace company by sales said gains from a big drop in its effective tax rate to 16% would be invested in product development, workforce training and factories as Boeing works through a huge backlog of commercial jetliner orders and targets higher world-wide military spending.

Boeing is one of the biggest corporate beneficiaries of the new tax regime, which it said was crucial to remaining competitive against arch rival Airbus SE and emerging players in a jetliner market buoyed by rapid global airline passenger growth.

"We will be ramping up investment in innovation as a result of the tax reform," Chief Executive Dennis Muilenburg told reporters after Boeing delivered forecast-beating quarterly profits and an upbeat outlook for 2018 and beyond.

Other aerospace companies have said in recent days that they would use tax gains to boost investment and pre-pay pension costs. Boeing Chief Financial Officer Greg Smith said capital spending was returning to "a more normalized level" of $2.2 billion this year as it completed some development work. He said spending would have been lower if tax reform hadn't been agreed.

Boeing has avoided previous production missteps as it developed new jetliners such as the 737 Max and 777X, boosting profits after investing in new automation and working practices, and pressuring suppliers for better terms. It has also cut thousands of staff, though Mr. Muilenburg said numbers had now "plateaued."

The company has plowed most of its free cash flow into stock buybacks and higher dividends, helping its shares more than double over the past year. The stock rose almost 5% on Wednesday, having reached another all-time high earlier in the session.

Operating cash is expected to climb to $15 billion this year from $13.3 billion. Boeing and Airbus have backlogs stretching ahead for seven years, and investors are increasingly focused on deliveries and cash flow rather than new plane deals.

The company handily beat forecasts for key financial metrics on Wednesday, forecasting that sales will climb to between $96 billion and $98 billion this year while deliveries of commercial jetliners rise to between 810 and 815. Boeing delivered 763 jetliners in 2017 and secured net orders for 912 planes.

Boeing plans to boost production of the 737 and the 787 jets again and this year is expected to decide whether to press ahead with developing a new midsize plane that would come into service around 2025. Mr. Muilenburg said tax reform could help the business case for the jet.

Mr. Muilenburg said Boeing remains in "active dialogue" with Brazil's Embraer SA over a deal that would broaden its range to include smaller jetliners and give the Chicago-based company access to thousands of engineers.

Boeing's per-share earnings in 2018 are forecast at between $15.90 and $16.10; with core profits excluding certain items such as pension costs at $13.80 to $14.00. Profit in the fourth quarter rose $3.13 billion from $1.6 billion a year earlier. Adjusted for tax gains and other items, per-share earnings climbed to $3.06 compared with the $2.89 consensus among analysts. Sales rose 9% to $25.4 billion.

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

(END) Dow Jones Newswires

January 31, 2018 13:30 ET (18:30 GMT)

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