Significant Increase In Profits And Jet Output And Delivery Projected By Boeing

Shares of Boeing Co gained 6 per cent after the company announced that 2018 would be the busiest year ever in terms of plane deliveries and that made the company forecast full-year profit much more than was anticipated by Wall Street.

In 2018, Boeing plans to deliver anywhere between 810 and 815 commercial aircraft. This would be 6.8 per cent more than the 736 jet deliveries in 2017 – an industry record. This would put the US plane maker ahead of its European rival Airbus for a consecutive six years. In 2017, 718 jets were delivered by Airbus.

There has been a large backlog of orders for new jetliners during the last few years because airliners demanded and ordered new, fuel-efficient planes to cater to the growth in demand for air travel. And therefore, both the companies are now busy to shore up production at their factories to reduce the backlog.

The core earnings for Boeing almost doubled in the fourth quarter of 2017 ending December 31at $4.80 per share, compared to $2.47 a year earlier. This rise was driven by growth in plane output and benefits from the change sin the U.S. tax laws.

In the last 12 months, the share price of Boeing has nearly doubled.

There was a 50 per cent rise in operating profits to reach $553 million, Boeing noted an 8 per cent growth of revenue in the fourth quarter for its commercial planes unit at $15.47 billion.

Growth was slow for the smaller defense business of the company.

There was a 17 percent growth in the revenues of the new services business of the company as it touched $4 billion in the fourth quarter. This unit maintains and overhauls airplanes for their owners. The unit also noted a growth of 9 percent in operating profits at $617 million.

By 2027, the company aims to generate revenues of $50 billion.

“Margins weren’t as good as I thought,” said Sheila Kahyaoglu, an analyst at Jefferies LLC in New York.

Wall Street analysts were also encouraged by the forecast in free cash flow of Boeing of at least &12.8 billion for the entire year.

“Actual results could ultimately be higher,” Seth Seifman, an analyst at JPMorgan, said in a note to clients. “As a result, we expect the stock to outperform despite its recent run now that management has set the table for a solid 2018.”

Both Boeing and Airbus generate more profit and cash by increasing production and lowering costs at the same time. However, the order backlog of both the companies continued to grow despite of the growth in production. By the end of 2017, the order back log of Boeing touched $488 billion and included military aircraft and other products. At the end of the third quarter it was 474 billion.

(Adapted from Reuters.com)

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