Boeing Beats Estimates on Improved Margins

Boeing Co. (BA) on Wednesday reported that quarterly earnings more than doubled, easily topping expectations, on improving margins in its commercial jet and weapons units, and raised its profit outlook for 2006.

The fourth-quarter results and rosy forecast dispelled concerns the No. 1 U.S. aerospace company would have a tough time maintaining momentum after commercial jet orders set a record last year. The stock, which surged in 2005, jumped nearly 5 percent in early trade on Wednesday.

"This is sort of an ongoing dialogue, but for the moment investors are pleased with these numbers, given where their head was," said Cai Von Rumohr, an analyst at SG Cowen. "Profits were good, cash was great, and the guidance was good."

Boeing said fourth-quarter profit rose to $460 million, or 58 cents a share, from $186 million, or 23 cents a share, a year ago.

Excluding exceptional items, it earned 74 cents a share, beating Wall Street analysts' expectations of 44 cents, according to Reuters Estimates.

Boeing stock, which rose 36 percent last year, has lost momentum early in 2006, up just 0.7 percent so far this year, even as the Amex Defense Index has gained 4.9 percent.

Von Rumohr said some investors are asking, "Is the bloom off the rose or not."

Revenue rose 7 percent to $14.2 billion, but were shy of analysts' estimates of $14.7 billion. Boeing said that strikes at its commercial aircraft and rocket launch businesses reduced full-year 2005 revenue by about $2.3 billion.

Looking ahead, Boeing raised its forecast for 2006 earnings per share to between $3.25 and $3.45 from the previous forecast of $3.10 to $3.30. For 2007, it sees earnings increasing to between $4.10 and $4.30 a share.

But Boeing reduced its full-year 2006 revenue outlook to $60 billion on what it said was a previously disclosed accounting change in its commercial airplane business.

The Chicago-based company kept unchanged its forecast for commercial jet deliveries in 2006 at 395 after a record 1,002 orders in 2005. For 2007, it forecast deliveries would rise to between 440 and 445 planes.

The company benefited in 2005 from robust demand from fast-growing airlines in Asia and the Middle East, especially with its new fuel-efficient 787 Dreamliner and workhorse 737 planes.

"The strength obviously in this quarter is in the commercial airliner business, and it's going to be that way for the next three or four years." said Chris Lozier, an analyst at Morningstar.

Boeing said commercial jet revenues rose 8 percent to $5.9 billion, with the operating margin improving to 5.6 percent from a negative 2.8 percent in the year-ago quarter.

Boeing, the No. 2 Pentagon contractor, reported that defense revenues rose 7 percent to $8.1 billion, with operating margins improving to 11.4 percent from 8.9 percent a year ago. It makes missile defense systems and military aircraft like the F-18, F-15 and the Apache helicopter.

Cash and investments in marketable securities rose to $8.4 billion at year's end from $7.5 billion at the end of the third quarter, even after it spent $832 million buying back shares in the quarter.

Shares rose $3.23 to $71.53 on the New York Stock Exchange.