Boeing's Profit Surges Ahead -- Aerospace Giant Exceeds Wall Street Forecasts
Boeing, once again meeting its pledge to please investors, reported an unexpectedly strong third-quarter profit.
For the fifth straight three-month period, the Seattle-based aerospace giant delivered a profit exceeding Wall Street estimates, essentially matching the performance of software giant Microsoft, a noted outperformer.
For the three months ended Sept. 30, Boeing said, profit before accounting for one-time charges was 56 cents a share, well ahead of Wall Street's consensus expectation of 48 cents a share.
The strong results pushed Boeing's stock up $3.375, or 8 percent, to $43.875 in midday trading. That made it the Dow Jones industrial average's biggest gainer.
Adding in the one-time items, including the sale of Boeing Information Services, profit was $477 million, 37 percent better than the year ago's $347 million. Profit per share was 52 cents, compared with 36 cents in the quarter a year ago. Sales rose 4 percent, to $13.3 billion from $12.7 billion a year ago.
Operating profit margin - what a company makes on each dollar of sales in its core businesses - continued to soar. In the commercial division, Boeing's largest segment, the operating margin jumped to 5.9 percent from 4.3 percent in the second quarter and a negative 1.8 percent in the quarter a year ago.
"That's huge," said Peter Jacobs, an analyst with the Ragen MacKenzie brokerage in Seattle. "That demonstrates commercial operations are definitely on the road to recovery."
That's especially important as Boeing moves into 2000, when deliveries of commercial jets are expected to drop to 480 from this year's 620.
With the operating margin so strong and still ascending - Boeing increased its own expectations for margins in both 1999 and 2000 - Wall Streeters, despite worries about next year, can hoist their short-term expectations.
Despite fewer airplane deliveries next year, Debby Hopkins, Boeing's chief financial officer, expects the commercial-airplane division to maintain strong operating margins. She raised her estimate to 5.5 to 6.5 percent, up from 5 to 6 percent.
The combination of continued productivity improvements and maintaining the 747 production rate at two planes a month in 2000 are the main reasons for a brighter outlook next year, she said today.
"We're seeing all of the key signs in the factory on target," Hopkins said. "We produced more airplanes with less people. We are particularly delighted with the strong improvement in cycle time. There are more improvements to come."
Wall Street tended to agree.
"The depth of the dark days are over," said Joseph Campbell, an aerospace analyst for Lehman Brothers. "They've come a long way from where they were, which was losing money, and closer to where they need to be and want to go, which is double-digit profit margins."
Boeing did not address employment, which has dropped from 240,000 18 months ago to 202,000.
Boeing is divided into three segments. Profit on its commercial-airline business was $501 million on sales of $8.5 billion. That compares with a year-ago loss of $142 million on $7.8 billion in sales. Profit on military aircraft and missiles was $102 million on sales of $2.8 billion, vs. $370 million on $3.2 billion in sales a year ago. Space and communications profit was $137 million on sales of $1.7 billion vs. the year-ago loss of $8 million on $1.6 billion in sales.
Sales this year should round out at $58 billion, Boeing said, with cash flow greater than $3 billion, an increase of a half-billion dollars over earlier projections. With fewer plane deliveries next year, sales should be $49 billion.