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Boeing's 2016 Outlook Worries Investors

By Industrials

Boeing (BA) sent a shockwave through the aerospace industry on Wednesday with a 2016 outlook that calls for fewer commercial airplane deliveries and some production cuts.

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The world’s largest aerospace company is coming off a record year in which it shipped 762 airplanes, thanks in large part to a ramp-up in Dreamliner production. Wall Street analysts expected deliveries to be flat this year, but Boeing provided guidance of 740 to 745 airplanes. Production plans include some of Boeing’s new 787-10 jets and Air Force tankers, but the company does not anticipate delivering any units by the end of the year.

In the fourth quarter, Boeing’s commercial airplanes unit booked $16.1 billion in sales, 4.4% less than the same period a year ago, as deliveries narrowed 6.7%.

Shares of Boeing fell as much as 9% early Wednesday, setting a new 52-week low at $115.02 a share. Other aerospace companies followed suit. Textron (TXT), the parent company of Cessna, Beechcraft and Bell Helicopter, was trading 8% lower. Spirit AeroSystems Holdings (SPR), which makes fuselages, dropped more than 5%.

Boeing predicted per-share adjusted earnings of $8.15 to $8.35 in 2016. Analysts were looking for a much stronger estimate of $9.43. Revenue also missed the mark. Boeing sees $93 billion to $95 billion in revenue, while Wall Street was projecting $97.2 billion.

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Boeing also reported fourth-quarter earnings of $1.03 billion, or $1.51 a share, a decline of 48% year-over-year. Revenue slipped 3.7% to $23.6 billion. The results, which beat expectations, include a $569 million write-down tied to slower production plans for the 747-8 jumbo jet.

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On a conference call with analysts, executives added that aircraft orders in 2016 should be close to Boeing’s output. Production of the 777 will be cut to seven per month next year, while Boeing will increase 737 production to 57 per month in 2019.

A bright spot in the latest quarter was Boeing’s military business. The defense, space and security division generated 2.6% revenue growth, hitting $7.8 billion for the period.

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