Boeing Co. (BA) reported a 7 percent drop in second-quarter profits Wednesday, but the aerospace firm still beat Wall Street's expectations and boosted its earnings outlook for the year due to expected strength in its core commercial airplane and defense units.

The Chicago-based company said it earned $566 million, or 70 cents per share, for the April-June period, down from $607 million, or 75 cents a share, a year earlier. The company's net earnings fell in part because of a 23 cents-a-share benefit from a tax refund in last year's second quarter.

Excluding a 9 cent charge related to the sale of commercial airplane facilities in Wichita, Kan., and Tulsa, Okla., Boeing said its earnings in the latest quarter were 79 cents per share. The average estimate of analysts polled by Thomson Financial was 61 cents a share.

Boeing upped its financial outlook for 2005 from a range of $2.40 to $2.60 a share to $2.75 to $2.85 a share, reflecting "stronger operating margins across Boeing's core businesses." Analysts on average currently expect a full-year profit of $2.58 a share.

Boeing's revenue for the second quarter was $15 billion, up 15 percent from $13.1 billion a year earlier and ahead of analysts' average estimate of $14.5 billion.

Shares of Boeing rose 2.6 percent to $68.10 after closing Tuesday at $66.35, near the high end of its 52-week range of $47.11 to $67.12.

The parent company of European aircraft maker Airbus SAS (search), Boeing's rival in the battle for supremacy in commercial airplane sales, on Wednesday also announced second-quarter earnings and revenue growth that eclipsed expectations.

European Aeronautic Defence & Space Co. (search) said net profit rose 47 percent to $585 million in the quarter on revenue of $10.8 billion. It reaffirmed its 2005 earnings guidance of $3.1 billion.

Boeing's resurgent commercial airplane business saw operating profits grow 24 percent from a year earlier to $475 million on revenue of $6.8 billion, which was up 20 percent.

The company delivered 85 airplanes, up 13 percent from a year earlier. It reaffirmed its forecast of 320 airplane deliveries for the year while boosting its 2006 forecast to 395 deliveries, up from an earlier estimate of 375 to 385.

On the military side, Boeing's operating earnings grew 17 percent to $816 million from $696 million, led by a 14 percent increase for its aircraft and weapon systems and 26 percent profit growth in support systems.

Overall revenue from its Integrated Defense Systems unit grew 8 percent to nearly $7.8 billion, up from $7.2 billion a year earlier.

"Second quarter results reflect Boeing's focus on strong execution and improved operational efficiency," said Chairman and CEO W. James McNerney (search), who was appointed to the post late last month after serving as CEO at 3M Co (MMM).