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Boeing raises full-year profit outlook

Earnings for 2014 excluding some pension expenses will be in a range
of US$7.90 to US$8.10 a share, Chicago-based Boeing said today, compared
with a previous projection for US$7.15 to US$7.35. Second-quarter
profit on that basis of US$2.42 a share beat the US$1.98 average of 20
analysts’ estimates compiled by Bloomberg.

The results may ease concern that the aerospace industry is entering a
slump, as Boeing’s shares trail broader U.S. indexes this year even
after handing over 181 aircraft last quarter. Investors are overlooking
global air-travel growth and demand for new jets, Douglas Harned, a
Sanford C. Bernstein & Co. analyst in New York, told clients
yesterday in a note.

“This is not what overcapacity looks like,” said Harned, whose
outperform rating is the equivalent of a buy.

“The strong demand is also
consistent with low deferral requests for Boeing and Airbus
deliveries.”

Boeing rose 2.3% to US$132.75 at 7:33 a.m. before regular New York
trading. The stock fell 4.9% this year through yesterday, the
second-biggest drop among the 30 companies on the Dow Jones Industrial
Average.

Sales rose 1% to US$22 billion, Boeing said. The quarterly results
included a cost of US$272 million, or 37 cents a share, related to
development work on the KC-46A tanker for the U.S. military, Boeing
said. The company also had two tax-related gains totaling US$116 million
that had been previously announced, as well as a US$408 million benefit
disclosed today.

Boeing is benefiting as its factories churn out 737, 777 and 787
aircraft at the fastest pace ever amid an order backlog shared with
Europe’s Airbus Group NV that’s valued at about US$1 trillion.

While Boeing still loses money on every Dreamliner it assembles,
losses are shrinking as it smoothes out production kinks and takes
advantage of supplier discounts that took effect earlier this year,
Harned wrote.

Investors are tracking how the supplier agreements affect the 787’s
deferred production cost, an accounting measure that is supposed to drop
as the assembly expense declines with a projected gain in efficiency.

Boeing estimated a ceiling of US$25 billion last year, up from a
previous forecast of US$20 billion.

“We’re particularly bullish about the prospect for material declines
in the growth of deferred production costs,” Carter Copeland, a New
York-based analyst for Barclays Plc, said in a July 21 report.

One blemish for Boeing’s commercial aircraft unit was the two 747-8
deliveries reported during the period, the weakest showing on record for
the iconic, humpbacked jumbo jet, said Yair Reiner, a New York-based
analyst with Oppenheimer & Co., in a July 6 report.

“No warm and fuzzies there,” wrote Reiner, whose rating on Boeing is
the equivalent of hold. Copeland’s overweight recommendation is the
equivalent of buy.