With final-assembly plants in Renton and Everett humming, Boeing raised its 2012 profit forecast for the full year. A breakdown of where the 787 program stands suggests Boeing will handily beat its full year delivery target.
Boeing’s commercial-jet business continues to boom even as the global economy flags.
Soaring production rates at the final-assembly plants in Renton and Everett are raking in cash, and on Wednesday the airplane-maker reported a strong financial performance in the third quarter and raised its profit forecast for the full year.
Meanwhile, as mechanics slowly work through a backlog of 787 Dreamliners parked in Everett, a detailed account of progress in the program suggests Boeing should handily beat its target of between 35 and 43 Dreamliners delivered by year’s end.
In a conference call with Wall Street analysts Wednesday, Chief Executive Jim McNerney expressed “confidence in our strategic position and growth trajectory.”
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He reiterated previous forecasts that the company will deliver between 585 and 600 commercial jets this year, compared with 477 in 2011.
The only dark cloud in the financial results — one that held down the share price — was a forecast of a higher-than-expected pension expense that will reduce net profits next year.
But clearly Boeing’s plants are humming.
“Operationally, the company is doing fantastically well,” said Carter Copeland, aerospace analyst with Barclays Capital. “They are delivering on the core programs and generating cash at high rates.”
On the 787 assembly lines, the quality of the work is steadily improving, said Chief Financial Officer Greg Smith.
He cited a 35 percent reduction in work required to complete airplanes leaving the factory in Everett, compared with the beginning of the year.
The overall number of jobs behind schedule in the 787 program is half what it was at the beginning of the year, Smith said, and Dreamliners are now rolling out of the Everett factory with only about 125 jobs to complete.
The Dreamliners delivered so far include a mix of airplanes newly rolled off the assembly lines and earlier jets that needed extensive reworking at Boeing’s modification center in Everett.
McNerney said the flow of reworked planes will slow because “we did the easier-to-do airplanes first and now we are moving onto airplanes that need more work.”
While Boeing is assembling Dreamliner No. 87, those older, more problematic 787s — either stored in parking spots on the Everett flight line and around Paine Field, or being worked on inside the modification center at the airport — include Nos. 10 through 19 and a dozen more with line numbers lower than 40.
Less rework needed
But at the same time, new 787s that need little reworking are flowing off the line at a rate close to five per month and are expected to gear up to 10 per month by the end of next year.
A tally by aviation analyst Uresh Sheth on the “All Things 787″ blog provided detail Boeing doesn’t make public on where the 787 program stands.
So far, Boeing has built 75 Dreamliners (not counting two ground-test airplanes, and three flight-test airplanes that have been written off) with nine more being assembled in Everett and in North Charleston, S.C.
Since September last year, 31 Dreamliners have been delivered, including one to LAN of Chile Wednesday. That jet raised the number delivered this year to 28.
Nine more Dreamliners are in pre-delivery flight test and six others are being prepped for test.
Of the rest, two flight-test airplanes that will eventually be sold are in long-term storage at Boeing Field, and 16 more are in Everett, all in line to be reworked.
A further 10 planes are being reworked now, all but one in Everett.
A single flight test 787 is being reworked at Boeing’s airplane modification center in San Antonio, Texas.
With the “easier-to-do” airplanes already reworked, those 28 Dreamliners that need more extensive work clearly will be a drag on the program through next year.
Nevertheless, this accounting suggests Boeing will likely surpass the high end of the 2012 delivery target range, with as many as 44 Dreamliners going to customers by year’s end.
And as Boeing slowly whittles away at the backlog of older Dreamliners, it is rapidly increasing current production.
The 777 assembly line in Everett already is moving to an unprecedented widebody-jet production rate of 8.3 per month (or 100 per year).
The 737 line in Renton is preparing to step up from 35 to 38 jets per month early next year.
The ongoing boom in these cash cow programs is reflected in Boeing’s financial results.
While other large companies — including 3M, Xerox and DuPont — this week reduced their profit forecasts, Boeing raised the expected earnings per share for the full year by 40 cents to a range of $4.80 to $4.95.
Revenue for the quarter was up to $20 billion, 13 percent higher than a year earlier.
Net profit of just more than $1 billion was slightly down from the year earlier, largely a result of a $583 million pension expense.
Earnings from operations rose 9 percent to $1.6 billion.
Boeing’s business generated $2.3 billion in cash during the quarter, driven by those rising production rates at the final-assembly plants here.
Discounting $750 million in cash contributions for company pension funds, that still left $1.6 billion in operating cash flow.
Despite the good news, the stock market looked askance at Boeing’s noncash pension-expense forecast for next year: $3.5 billion.
That’s about $400 million more than analysts had expected and will come out of earnings next year.
As a result, Boeing’s stock closed Wednesday down slightly at $72.71.
During the conference call, reporters quizzed McNerney on the schedule for future airplanes and the strategic decisions ahead on where work will be done, but he provided no new details.
Decisions regarding the launch of the next version of the Dreamliner, the 787-10, and a new derivative of the 777, the 777X, are expected respectively late this year and early next.
McNerney said airlines want the 777X to enter service by the end of the decade, and this is what Boeing is considering.
He reiterated that Boeing engineers are considering a huge composite wing for the 777X. After Boeing launches the 777X program, it must decide where that wing will be made.
Washington and South Carolina are each eagerly awaiting that news, but McNerney deflected a question on the matter, saying Boeing’s first priority is to settle on the right airplane design.
“We’re a long way from making a decision on where we’ll build the 777 wing,” McNerney said. “A long way.”
Dominic Gates: 206-464-2963 or firstname.lastname@example.org