Boeing Posts $1.56 Billion Loss
OCTOBER 21, 2009, 12:11 P.M. ET
By ANN KEETON
online.wsj.com
Hammered by cost overruns on two new commercial-aircraft programs, Boeing Co. swung to a $1.56 billion loss for the third quarter. Boeing recorded $3.5 billion in previously announced charges on its 747-8 and 787 Dreamliner jets in development.
Chairman and Chief Executive Jim McNerney said Wednesday that Boeing's core businesses remain strong, although challenges remain in the commercial-aircraft and defense markets. The company slashed its earnings forecast.
Mr. McNerney said the Dreamliner and 747-8, which mostly is being ordered as a freighter, remain on track to be delivered to their first customers at the end of next year. While costly, the Dreamliner remains on track to record a profit, unlike the 747-8 program.
Mr. McNerney said Boeing continues to evaluate the need to cut commercial-aircraft output but has no plans to reduce production of its 737. Earlier this year, Boeing reduced production for the 777, citing lower demand from airlines.
Boeing's finance unit will provide $800 million of financing this year, falling short of the $1 billion it had expected to provide as capital markets have opened up, Mr. McNerney said.
The Chicago-based company cut its forecast for earnings this year to between $1.35 and $1.55 a share from $4.70–$5 a share. Defense work, which accounts for nearly half of Boeing's revenue, has failed to make up for losses in commercial aircraft.
Defense rival Lockheed Martin Corp. on Tuesday posted a slight increase in profit but forecast a decline in 2010 earnings because of belt-tightening at the U.S. Defense Department.
Boeing said Wednesday that the Dreamliner remains on track to make its first test flight by year-end and its first delivery near the end of 2010.
Morgan Stanley analyst Heidi Wood cut her rating on Boeing shares to "underweight" from "equalweight" Tuesday, worried that complex design modifications could delay the first delivery of the Dreamliner into the spring of 2011. That would put Boeing on the hook for paying additional late fees to customers.
Despite speculation that Boeing could end the 747-8 program, Mr. McNerney said the company looks forward to getting the plane in the air soon.
Boeing's $1.56 billion third-quarter loss amounted to $2.23 a share. That compares with a year-earlier profit of $695 million, or 96 cents a share. Charges reduced results by $3.59 a share.
Revenue was $16.69 billion, up 9.1% from last year, when a machinists strike hurt sales.
The commercial-aircraft segment swung to a $2.84 billion operating loss. Sales rose 13% to $7.88 billion as higher deliveries offset lower services volume.
Defense-business revenue rose 2.9% to $8.74 billion. Defense earnings increased 3.6% to $885 million.
Write to Ann Keeton at ann.keeton@dowjones.com
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