Boeing Beats 3rd-Quarter Forecasts, Although Jet Orders
Are Threatened
By LAURENCE ZUCKERMAN -- October 23, 1998
The Boeing Co. reported third-quarter earnings
Thursday that were higher than expected, but it
warned that the
recession in Asia would cause it to lose more airplane
orders than it had previously estimated.
Boeing, the aerospace giant based in Seattle, became
profitable during the quarter after facing production
problems and other difficulties last year that forced
it to take a $1 billion charge. But with the economic
downturn in Asia threatening to spread to Europe and
the United States, it appears that Boeing's internal
troubles caused it to miss out on one of the biggest
airplane booms in history. By the time next year when
the company's airplane division is expected to be fully
recovered, demand for new jets is expected to be
declining.
For the quarter, the company earned $347 million, or 36
cents a share, on $12.7 billion in revenue. The
per-share figure was well above the average estimate of
27 cents forecast by Wall Street analysts surveyed by
the First Call Corp. In the period a year earlier,
Boeing reported a loss of $696 million, or 72 cents a
share, on revenue of $11.4 billion.
"There were puts and takes that got you to the slightly
better number than expected," said Howard Rubel, an
analyst at Goldman, Sachs & Co. in New York. "Most of
it was driven by other income and tax benefits."
Boeing executives said the company was re-examining its
market forecasts in light of Asia's economic turmoil.
Airlines serving Asia are responsible for a large part
of the sales of Boeing's 747 jumbojet, its most
lucrative civilian airplane. But many airlines have
reduced their flights in the region over the last year
or are switching to smaller planes.
Boeing recently increased production of the 747 and the
newer 777 widebody to five and seven a month but was
planning to reduce production in the middle of next
year. Now, it is considering cutting the production
rates even further. The company says it is holding 34
completed planes in storage while its customers try to
come up with the money to pay for them or Boeing tries
to line up alternate buyers.
Meanwhile, the company is still struggling to meet its
production schedules. To meet its target of delivering
550 commercial airplanes this year, it must produce 182
during the fourth quarter, more than ever before.
Alan Mulally, who was named head of Boeing's commercial
airplane division last month after the ouster of his
predecessor, Ronald Woodard, said Thursday that Boeing
was delaying previously announced plans to begin
production of 737 narrow-body jets in Long Beach,
Calif., so the company could focus on meeting its
delivery schedule.
Boeing was dealt a new setback recently when it learned
that one of its suppliers had shipped it thousands of
defective electrical connectors. Mulally said that no
planes containing the faulty parts had been delivered
to customers and that enough functioning parts were
available to allow production to continue. But workers
must spend hours inspecting recently completed planes
to find out which ones were affected and then fix them.
Despite all its travails and weakening demand for its
commercial airplanes, some analysts think Boeing, which
has seen its stock fall 35 percent since April, has
turned the corner. Nicholas Heymann, the aerospace
analyst at Prudential Securities who was one of the
first on Wall Street to turn bearish on Boeing last
year, upgraded his advisory on the stock Thursday to
"accumulate" from "hold."
He said that Boeing executives were beginning to cut
costs and that the company would start generating a
large amount of cash next year. Indeed, Boeing
announced a stock repurchase plan in August and said
Thursday that it spent $364 million to buy 10.6 million
of its own shares in September.
"At this point, we believe people will have to revise
upward their estimates after having revised them down
for six quarters," Heymann said.
Boeing shares closed Thursday at $36.4375, up 43.75
cents, on the New York Stock Exchange.
Copyright 1998 The New York Times Company |
