Boeing on Wednesday reported a strong end to 2014, forecast better cash flow and said it would deliver more commercial planes in 2015.
The company's stock rose 5 percent on signs that it would soon generate more cash from sales of its 787 Dreamliner.
Boeing said its net earnings rose 19 percent in the fourth quarter to $1.47 billion, or $2.02 a share, from $1.23 billion, or $1.61 a share, a year earlier.
After the huge cost of developing the Dreamliner, the first jetliner made substantially with lightweight carbon composites to save fuel, Wall Street has mainly been looking for indications that Boeing expects to meet its goal of making a profit on the sale of each plane this year. In the company's guidance, it said it expected operating cash flow to top $9 billion in 2015, up from $8.86 billion in 2014.
Robert Stallard, an analyst at Royal Bank of Canada, wrote in a note to investors that after subtracting capital investments to improve manufacturing efficiency, Boeing's free cash flow was significantly higher than he had expected in the fourth quarter.
"Cash has been the mantra from Boeing over the last couple of years," he said, "and investors have finally seen the 2014 cash flow show up."
For 2015, Boeing expects to deliver 750 to 755 commercial planes, up from a record 723 in 2014. It also forecast that its revenue would rise to $94.5 billion to $96.5 billion this year, from $90.76 billion last year.
The company, based in Chicago, said its so-called core operating earnings could dip in 2015, to $8.20 to $8.40 a share, from $8.60 in 2014, when Boeing received tax settlements worth 71 cents a share.
For the fourth quarter, Boeing reported its core operating earnings, excluding pension and other costs, jumped 28 percent to $2.34 billion, or $2.31 a share, from $1.84 billion, or $1.88 a share. Analysts polled by Thomson Reuters had, on average, expected $2.11 a share. Boeing said revenue rose 3 percent to $24.47 billion, from $23.79 billion in the year-ago quarter.
Boeing has released such core earnings figures in recent years to show how its businesses are doing without the effect of what can be large swings in its pension funding obligations.
The deferred production cost for the 787 program rose to $26.1 billion, Boeing said Wednesday, coming off the previous quarter in which it said the cost was $25.2 billion and could go higher. Boeing said deliveries of the 787 increased to 114 last year, from 65 the year before.
The deferred production cost accounts for the gap between what it actually costs the company to build each plane and the average cost it has projected for the first 1,300 aircraft. Under an accounting method that Boeing has long used, it can book profits on aircraft sales now against that average projected cost. But it has to keep a running tally of the additional cost of each plane as the deferred cost total.
Gregory Smith, Boeing's chief financial officer, told analysts Wednesday that the deferred production cost could keep rising moderately over the next two or three quarters, as Boeing spent more on productivity improvements. Still, he reiterated that Boeing expected to start making a profit on Dreamliner deliveries this year, with the sales price exceeding the actual cost of building the plane. And after Boeing increases its production rate for the jets to 12 each month in 2016 from 10 now, the deferred cost total should begin to decline rapidly, he said.
He said Boeing had already factored the additional deferred production costs into its cash-flow projections.
Boeing shares rose $7.16, or 5.4 percent, to close Wednesday at $139.64.
Business on 01/29/2015