Boeing Q3 profit jumps on airliner demand
As airlines continue to swap older planes for new, more fuel-efficient jets, Boeing's profits are climbing.
Third-quarter earnings rose 18% from last year's third quarter, while earnings per share rose 23% to $1.86, Boeing (BA) said Wednesday.
Excluding special items, the U.S. jetmaker earned $2.14 per share, or $2.4 billion. That beat Wall Street's predictions, which were $1.98 per share, according to TheStreet.com.
Revenue rose 7% to $23.8 billion.
Boeing shares closed down 4.5% to $121.45 on Wednesday.
The company's backlog reached a record, with more than 5,500 orders for commercial planes valued at a record $430 billion. That represents roughly seven years of production at Boeing's current rates.
During the third quarter, Boeing delivered 186 commercial jets, including seven of its much ballyhooed but problem-plagued Dreamliners. Deliveries were up 9% from the same quarter a year ago, when Boeing delivered 170 commercial planes. The plane maker also had new orders for 501 commercial planes during the July-September period.
"Third-quarter financial performance reflects the strength of our backlog and strong demand for our products and services," BoeingChief Financial Officer Greg Smith said in an earnings call Wednesday.
A big part of the commercial plane demand stems from airlines replacing older, less fuel-efficient aircraft, as opposed to adding on to existing fleets, said Boeing CEO Jim McNerney. That's a departure from the past and a trend that will likely continue for another decade, he says.
"I think you're going to see it continue for a while as the new technology we've developed rolls through our model families,'' McNerney said during the earnings call. He added that despite the recent drop in oil prices, the demand for more fuel-efficient aircraft is likely to remain strong. "This generation of new planes that we are introducing (is) anywhere from 16% to 24% more efficient than the planes they're replacing.''
Including special items, the company's guidance for earnings per share for 2014 rose to between $6.90 and $7.10 from $6.85 to $7.05.
"With three solid quarters behind us and confidence in our ongoing performance, we are increasing our earnings-per-share outlook for 2014, as our team remains focused on providing value to our customers and shareholders, profitably ramping up airplane production, executing on our development programs, and driving productivity and affordability throughout the enterprise," McNerney said.
Despite the drop in Boeing's stock price Wednesday, analysts were upbeat about its earnings outlook and said the price dip could be a buying opportunity for investors.
"I think there is a perception in the market that BA is seeing a bit of a mix shift towards less profitable aircraft,'' said S&P Capital IQ analyst Jim Corridore about the drop in stock price. "We are positive on the order growth, the revenue growth and expect BA to be able to loft production levels and continue to increase operating margins as well. We would use today's dip as an enhanced entry point.''