Boeing predicts estimate beating profits

Boeing on Wednesday forecast full-year profit well above Wall Street estimates as it looks forward to its busiest year ever for plane deliveries, sending its shares up almost 5 per cent.

The world’s biggest plane maker also said it would end years of job cuts in 2018, but would not now start hiring more people because of the recent reduction in the US corporate tax rate.

“More of an employment plateau in the near-term,” Boeing chief executive Dennis Muilenburg said.

Boeing has shed 20 per cent of its workforce, or about 34,000 jobs, since employment peaked in 2012, in a bid to reduce costs and improve profits. Several US companies have promised to boost hiring after December’s new tax law slashed the corporate rate to 21 per cent from 35 per cent.

Although Chicago-based Boeing delivered more aircraft to customers than Airbus last year, and is much more profitable, it is still in a dogfight to win orders after its European rival sold about 22 per cent more planes last year.

“Our focus is to make Boeing ever tougher,” Mr Muilenburg said.

Boeing said it aims to ship between 810 and 815 commercial aircraft in 2018, as much as 7 per cent more than the industry-record 763 jets it delivered in 2017, putting it ahead of Airbus for the sixth year in a row. Airbus delivered 718 jetliners last year.

Both companies are speeding up production at their factories to chip away at the large backlog of orders for new jetliners, created over the past few years as airlines want new, fuel-efficient planes to cope with a surge in demand for air travel.

Helped by the hunger for new jets, Boeing forecast core profit would rise to $13.80 to $14.00 a share in 2018, ahead of analysts’ average estimate of $11.96, according to Reuters.

For the fourth quarter ended December 31, Boeing’s core earnings nearly doubled to $4.80 per share from $2.47 a year earlier, buoyed by rising plane output and a $1.74 per share gain from changes to the US tax law.

Boeing shares, which have more than doubled in the past 12 months, rose 4.7 per cent to $353.60 on the New York Stock Exchange.

Boeing’s commercial planes unit posted an 8 percent increase in revenue in the fourth quarter to $15.47 billion, while operating profit rose 50 per cent to $1.78bn.

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The company’s smaller defence business grow more slowly. Revenue for the unit rose 5 per cent to $5.54bn while operating profit rose 6 per cent to $553 million.

Boeing’s new services business - which maintains and overhauls planes for their owners - posted a 17 per cent increase in revenue to $4bn in the fourth quarter while operating profit rose 9 per cent to $61m. Boeing is aiming to hit $50bn in revenue in that business by 2027.

However, profit margins at the unit narrowed slightly to 15.4 per cent, and Boeing said it expects margins near that level this year.

“Margins weren’t as good as I thought,” said Sheila Kahyaoglu, an analyst at Jefferies in New York.

Boeing also forecast at least $12.8bn in free cash flow this year, encouraging Wall Street analysts, who generally view the company’s early targets as conservative.

“Actual results could ultimately be higher,” Seth Seifman, an analyst at JP Morgan, said in a note to clients. “As a result, we expect the stock to outperform despite its recent run now that management has set the table for a solid 2018.”

By raising production while holding down costs, Boeing and Airbus generate more profit and cash.

Despite the rising output, their order backlogs have kept growing. Boeing said its total backlog, which includes military aircraft and other products, rose to $488bn at year-end, compared with $474bn at the end of the third quarter.

Excluding the gain, Boeing reported earnings of $3.06 a share. On that basis, Wall Street had been expecting $2.89 a share.

Mr Muilenburg said Boeing still expects to increase operating profit margins to the mid-teens by 2020, from 9.6 per cent last year, with most of the gain coming from reducing the cost of making 787 Dreamliners, while holding costs of its workhorse single-aisle 737 steady.