Boeing yesterday raised its forecasts for airplane deliveries and profits as it posted a strong financial performance in the second quarter...

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Boeing yesterday raised its forecasts for airplane deliveries and profits as it posted a strong financial performance in the second quarter.

The Renton-based commercial-airplane division is driving the optimism. Boeing plans to deliver almost 400 airplanes next year.

“As we see growth moderate in Integrated Defense Systems [the company’s military division], we’re able to overcome that by the growth we’re seeing in Boeing Commercial Airplanes,” said Chief Financial Officer James Bell in a conference call with analysts and journalists.

The company reported net profit for the second quarter of $566 million, or 70 cents a share, on sales of $15 billion.

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That profit is down 7 percent from the second quarter in 2004. However, last year’s 75 cents a share included a one-time tax windfall equivalent to 23 cents a share.

Excluding that and this quarter’s non-recurring charge of 9 cents a share for the sale of the Wichita plant, the results announced yesterday show significant profit growth.

Sales rose 15 percent in the last three months compared with the same quarter a year ago, with deliveries up 20 percent in the commercial division and 8 percent on the defense side.

Boeing Commercial Airplanes
vs. Airbus

Comparative performance for first half 2005

Boeing wins big on orders, Airbus on profit

Net Orders:

Boeing 419 jets (including 98 wide-bodies)

Airbus 276 jets (including 36 wide-bodies)


Boeing 155 jets (including 34 wide-bodies)

Airbus 189 jets (including 48 wide-bodies)


Boeing $11.9 billion

Airbus $13.5 billion


Boeing $939 million

Airbus $1,735 million

The above profit figures are before interest and taxes and exclude exceptional items. They are generally comparable, though there may be some discrepancy due to different accounting practices.

Source: Boeing and Airbus parent company EADS

The stock market reflects Bell’s bullishness. While the broad Standard & Poor’s 500 index has risen just 2 percent for the year, Boeing’s stock is up 29 percent, closing yesterday up 35 cents at $66.70.

“I’d take that kind of performance any day,” said Howard Rubel, an aerospace analyst with the Jefferies Group.

“The numbers spoke for themselves. They represented the accumulation of a lot of hard work,” Rubel said. “But it ain’t over. They are not resting on their laurels.”

With Boeing preparing to ramp up jet production to meet the surging commercial market, Bell yesterday projected further earnings boosts.

Boeing will stick to its delivery outlook of 320 airplanes this year but raised its delivery forecast for next year to 395, up from a previous range of 375 to 385. A further increase in 2007 is likely.

The forecast for 2005 earnings was raised to $2.85 a share from $2.60 at the high end of the range.

Bell said the operating profit margin in the commercial division will come in at about 7 percent for the year and is headed toward double-digit margins further out. “We’re clearly on that track,” he said.

An analysis by Aerospace Market News, a London-based trade publication, shows the past quarter as the best ever for large commercial-jet orders and that Boeing won 70 percent of those sales over Airbus.

The 737 alone has an order backlog of 984 planes, more than one-third of the entire order backlog for all large commercial jets built by the two manufacturers.

In April, the difference between Airbus’ and Boeing’s order books was at its widest point ever — Airbus had 468 more planes on order than Boeing. But Boeing narrowed the gap to 220 by the end of the second quarter.

That’s the lowest backlog gap in three years, said Phil Abbott, editor of the London publication. “This really is quite remarkable,” he said. “These guys [Boeing] have certainly started to recover their market share in a very big way.”

In contrast to the commercial market, near-term expectations on the defense side are relatively restrained due to congressional concerns over defense-spending plans.

Yet despite what Bell described as “slowing growth in the Department of Defense budget over the next few years,” he said the unit is performing well and positioned for “modest growth.”

The defense side is increasingly important in the Puget Sound region, with 7,200 employees bringing in around 10 percent of the unit’s revenues. Many of the local employees in the division work on advanced technologies and research programs.

Bell provided totals for projected company investment, though he declined to lay out how much is for the new 787 jet program and how much for various military programs.

Boeing will spend a total $1.5 billion this year and $1.7 billion next year on capital expenditures. For research and development, it will spend between $2.3 billion and $2.5 billion this year and between $2.5 billion and $2.7 billion next year.

During yesterday’s conference call, new Chief Executive James McNerney largely took a back seat to Bell, saying he has “mostly been listening and learning” since joining the company July 1.

But he did offer a clue to his direction by listing some of his areas of focus. Several were big themes at McNerney’s previous jobs at both General Electric and 3M, including “process improvement” and “management development.”

The latter may signal renewed emphasis on cycling managers through Boeing’s leadership-training center.

And while “process improvement” could mean an amplification of Boeing’s lean-manufacturing drive, company insiders were left wondering if it may be code for the “Six Sigma” management technique so prominent at GE. Six Sigma involves using rigorous project analysis to streamline every aspect of corporate activity.

McNerney offered no specifics. But he clearly means to swing into action eventually.

“Stay tuned,” he said.

Dominic Gates: 206-464-2963 or