Delayed jets put Boeing in profit dive

Boeing on Wednesday posted a third-quarter loss that was bigger than analysts estimated and reduced its full-year profit forecast, hurt by $3.5 billion in charges for the delayed 787 Dreamliner and 747-8 jumbo-jet programs.

The net loss of $1.56 billion, or $2.23 a share, compared with a year-earlier profit of $695 million, or 96 cents, the Chicago-based company said today. The average estimate was $2.10 in a survey of 18 analysts.

The quarterly loss was the company's biggest in Bloomberg records dating to mid-1983.

Boeing took combined charges of $3.59 a share for the 787 Dreamliner, whose first three test planes have no commercial value because of extensive reworking, and for the 747-8, which the company this month said is more expensive and encountering lower demand than it predicted.

"We're walking a fine line at this point, and any other delays with either program could seriously affect the outlook from 2011 on," said Michel Merluzeau, a consultant with Kirkland-based G2 Solutions.

Sales rose 9.1 percent to $16.7 billion from the year-earlier quarter, which was hurt by a Machinists strike. That was less than the $17.2 billion average estimate in the Bloomberg survey.

Boeing, which trails only Airbus in commercial-plane deliveries, saw its stock fall $1.26, or 2.4 percent, to close at $50.63. The shares have risen 19 percent this year, though they dropped 50 percent since October 2007, when the first of five 787 delays became known.

Full-year profit may be $1.35 to $1.55 a share on sales of $68 billion to $69 billion, Boeing said. The previous forecast, made in July before the charges were disclosed, was $4.70 to $5 a share. The company won't give a 2010 target until January.

Analysts had estimated 2009 profit of $1.67 a share and 2010 earnings of $4.42.

Penalties to customers and suppliers are mounting because of setbacks for the jets, neither of which has flown yet. Boeing reiterated Wednesday that the 787 will fly this year and be delivered to the first customer at the end of 2010.

"With no status change on the 787, there's just not much to drive the stock today," said Matt Collins, an analyst with Edward Jones. "Everybody is just holding their breath on the 787."

"We are concerned about cash-flow levels for the 787 and the potential for substantial rework on airplanes in production, should the test flight and certification process uncover necessary changes," Douglas Harned, a Sanford C. Bernstein & Co. analyst in New York, wrote in a note.

The loss for the commercial-airplane unit was $2.84 billion on sales of $7.88 billion, compared with year-earlier profit of $394 million.

The backlog fell to $254 billion from $257 billion as of June 30 as orders lagged behind deliveries and cancellations.

Boeing reported 170 orders and 91 cancellations through September, leaving a net order book for the year so far of 79 planes, compared with 123 for Toulouse, France-based Airbus.

Boeing lost the top position to Airbus in 2003 and was running one jet ahead of its rival in shipments through September. Deliveries, which trigger the bulk of payments, will rise this year to 480 to 485 aircraft, Boeing repeated Wednesday. Airbus has said it expects to ship about the same number.

Delivery slots are sold out for 2010, and the level of deferral requests isn't getting worse, CEO Jim McNerney said on the conference call. He and a spokesman declined to comment on the trend for cancellations.

Boeing this year has increased deliveries even as airlines canceled and deferred orders because of the recession. Shipments rose 35 percent to 113 compared with last year's third quarter, which was hurt by the two-month Machinists strike and by delays related to work on airplane galleys. The disruptions shaved 60 cents a share from earnings in the year-earlier quarter.

Boeing now only expects to provide $800 million in direct funding to customers, less than the $1 billion it had predicted, as "financing markets are actually getting more robust," McNerney said.

It plans to scale back twin-aisle production in June, cutting 777 output 29 percent to five planes a month and delaying increases in the 747 and 767 programs. No changes are planned to the 737 production rate, McNerney repeated Wednesday.

Boeing's military business, the second-largest U.S. defense contractor, posted a 2.9 percent sales gain to $8.74 billion and a 3.6 percent increase in profit to $885 million.

The unit has a "weaker outlook" than competitors because the company is on the wrong set of programs as the Pentagon curbs spending, analyst Harned wrote in a note. The Defense Department has canceled parts of Boeing programs and scaled back others. Northrop Grumman beat Boeing on Oct. 1 for a $3.8 billion contract to maintain the U.S. Air Force's KC-10 aerial-refueling tanker fleet, and the two are still competing for a $35 billion order for the next generation of KC-135 tankers.

Northrop, the third-largest U.S. defense contractor, said Wednesday that quarterly profit fell 4.3 percent to $490 million, or $1.53 a share, because of higher pension costs. The company raised its 2009 forecast.