Boeing Co., the world's largest aircraft maker, reported a 31 percent decline in third-quarter profit yesterday as its flagging commercial aviation business swamped gains in defense contracting.
The company said net income fell to $256 million (32 cents a share) from $372 million (46 cents) in the same period last year. The earnings topped analysts' expectations of 25 cents a share, according to Thompson First Call, sending Boeing's shares up $2.46, or 6.8 percent, to $38.50.
Revenue slipped 4 percent, to $12.2 billion from $12.7 billion. Boeing said it made a $1.2 billion contribution to its employees' pension accounts during the quarter, which weighed on the results.
"All things considered, we had a very good quarter," said Philip M. Condit, Boeing's chairman. "Revenues were on track, with growth in our defense businesses offsetting the continued commercial market downturn."
Defense business revenue grew 12 percent during the quarter, to $7.3 billion from $6.5 billion last year. Boeing, the Pentagon's second-largest contractor, was helped in the quarter by the delivery of orders for Joint Direct Attack Munitions, or JDAMs, which turn "dumb" bombs into precision-guided weapons. The defense business also was aided by contracts for explosive detection systems for airports and advanced communications for weapons systems.
"It looks like their defense side bailed them out," said Michael Doran, an analyst at Victory Capital Management, an investment advisory firm that owns 3.4 million Boeing shares.
On the strength of its defense business, Boeing raised its revenue outlook for the year to $50 billion from its previous estimate of $49 billion. But the company still projects a loss for the year of 2 to 12 cents a share, largely because of charges related to the commercial aircraft business.
The company's 2003 forecast assumes that Congress will approve a $21 billion plan for the Air Force to lease 100 Boeing 767 tankers, which refuel fighter jets in midair, company officials said. The proposal, which has been criticized as too expensive, is in limbo while the Senate Armed Services Committee pushes an alternative plan that would lower the cost by $4 billion.
"We just have to wait and see how the Congress decides to go forward with the program," Michael Sears, Boeing's chief financial officer, said in a conference call with analysts. Boeing expects to receive $350 million in the fourth quarter if the deal is approved.
The lease proposal has gained importance to Boeing as its commercial business has faltered. Backlog for the 767 has dwindled to 31 this year, meaning that without the lease program, the production line could close down by 2008, said Richard L. Aboulafia, aviation analyst for the Teal Group, a defense research firm. The lease would extend the brand's life into the next decade, he said.
Overall, Boeing delivered 65 planes during the quarter compared with 73 last year, driving the commercial unit's revenue down 17 percent, to $5 billion from $6 billion.
The unit's earnings fell 90 percent, to $35 million from $334 million, reflecting a $184 million charge to cease production of the 757 next year. Boeing has delivered more than 1,000 of the planes, which first became available 20 years ago, but demand from domestic airlines has dried up. Company officials said the U.S. airline market remains relatively weak and a global recovery is two years away.
Condit said the commercial unit "is doing a fantastic job in an incredibly difficult market."
The company said net income fell to $256 million (32 cents a share) from $372 million (46 cents) in the same period last year. The earnings topped analysts' expectations of 25 cents a share, according to Thompson First Call, sending Boeing's shares up $2.46, or 6.8 percent, to $38.50.
Revenue slipped 4 percent, to $12.2 billion from $12.7 billion. Boeing said it made a $1.2 billion contribution to its employees' pension accounts during the quarter, which weighed on the results.
"All things considered, we had a very good quarter," said Philip M. Condit, Boeing's chairman. "Revenues were on track, with growth in our defense businesses offsetting the continued commercial market downturn."
Defense business revenue grew 12 percent during the quarter, to $7.3 billion from $6.5 billion last year. Boeing, the Pentagon's second-largest contractor, was helped in the quarter by the delivery of orders for Joint Direct Attack Munitions, or JDAMs, which turn "dumb" bombs into precision-guided weapons. The defense business also was aided by contracts for explosive detection systems for airports and advanced communications for weapons systems.
"It looks like their defense side bailed them out," said Michael Doran, an analyst at Victory Capital Management, an investment advisory firm that owns 3.4 million Boeing shares.
On the strength of its defense business, Boeing raised its revenue outlook for the year to $50 billion from its previous estimate of $49 billion. But the company still projects a loss for the year of 2 to 12 cents a share, largely because of charges related to the commercial aircraft business.
The company's 2003 forecast assumes that Congress will approve a $21 billion plan for the Air Force to lease 100 Boeing 767 tankers, which refuel fighter jets in midair, company officials said. The proposal, which has been criticized as too expensive, is in limbo while the Senate Armed Services Committee pushes an alternative plan that would lower the cost by $4 billion.
"We just have to wait and see how the Congress decides to go forward with the program," Michael Sears, Boeing's chief financial officer, said in a conference call with analysts. Boeing expects to receive $350 million in the fourth quarter if the deal is approved.
The lease proposal has gained importance to Boeing as its commercial business has faltered. Backlog for the 767 has dwindled to 31 this year, meaning that without the lease program, the production line could close down by 2008, said Richard L. Aboulafia, aviation analyst for the Teal Group, a defense research firm. The lease would extend the brand's life into the next decade, he said.
Overall, Boeing delivered 65 planes during the quarter compared with 73 last year, driving the commercial unit's revenue down 17 percent, to $5 billion from $6 billion.
The unit's earnings fell 90 percent, to $35 million from $334 million, reflecting a $184 million charge to cease production of the 757 next year. Boeing has delivered more than 1,000 of the planes, which first became available 20 years ago, but demand from domestic airlines has dried up. Company officials said the U.S. airline market remains relatively weak and a global recovery is two years away.
Condit said the commercial unit "is doing a fantastic job in an incredibly difficult market."
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