Boeing reported a first-quarter profit Wednesday that topped analysts’ estimates and said problems with the lithium-ion batteries on its 787 Dreamliner jets would not keep it from hitting its profit and revenue targets for the year.
Boeing’s shares rose 3 percent to close at $90.83, continuing a rally that began last month as the company devised a fix to the battery issues that had grounded the 787s since January.
The Federal Aviation Administration on Friday approved modifications to minimize the odds the batteries would emit smoke or catch fire. Some airlines are expected to begin flying the jets again in May.
On a call with analysts, CEO Jim McNerney said the company expected to finish modifying the battery systems by mid-May on most of the 50 787s now in airline fleets.
Most Read Business Stories
- Pandemic gave locals fleeting taste of a tourist-free Hawaii
- Amazon's $3,000 signing bonuses irk workers who got $10 coupons
- ‘Ugly, ugly time’: Work-from-home era crushes U.S. dry cleaners
- For sale: $6 million Whidbey Island survival compound, stocked to withstand a pandemic VIEW
- Jobless claims soar as new restrictions hit restaurants and other Washington state businesses
Boeing has never publicly estimated the cost of the battery problem, and its executives declined to provide any numbers on the earnings call. Analysts have said the final tally could be hundreds of millions of dollars after airlines are compensated.
In Japan on Wednesday, regulators indicated they were satisfied with the battery changes and would declare the planes fit to fly as early as Thursday.
“Boeing has come up with a fix that addresses a very wide range of potential problems,” said Hirohiko Kawakatsu, an air-safety official at the Ministry of Transport. “In that regard, we see no problems with the fix.”
Japan’s approval would allow resumption of flights by All Nippon Airways and Japan Airlines, which own about half the 787 jets so far delivered.
To date, investigators have not determined what caused the battery fire in a plane on the ground in Boston or smoke from a battery during a flight in Japan in January.
In its earnings report Wednesday, Boeing said its first-quarter profit jumped 20 percent to $1.1 billion, or $1.44 a share, from $923 million, or $1.22 a share, a year earlier.
Revenue fell 3 percent to $18.89 billion from $19.38 billion. That was partly because Boeing delivered only one 787, due to the battery problems, compared with five in the year-earlier quarter.
Excluding pension costs and other ancillary items, Boeing said its core operating profit rose 5 percent to $1.87 billion, or $1.73 a share, from $1.77 billion, or $1.40 a share, a year earlier. According to Thomson Reuters, the average analyst estimate was $1.49 a share.
Boeing also reaffirmed earlier guidance that it expects its core earnings to reach $6.10 to $6.30 a share, on revenue of $82 billion to $85 billion, for 2013. Using traditional accounting measures, including pension costs, it expects earnings of $5 to $5.20 a share for the year.
The company said the cost of dealing with the battery problems was also partly offset by increases in first-quarter deliveries of its highly profitable 737 and 777 jets. Cost-cutting also helped its large military business increase its profit despite government budget reductions.
Chief Financial Officer Gregory Smith told analysts the first-quarter results included an estimate of the cost of redesigning and replacing the batteries, which he said was “minor in comparison to the overall numbers.”
McNerney said Boeing’s sales contracts did not require it to compensate airlines for the schedule disruptions, but he added there were “a few places where we’ll work with our customers, and there are a variety of ways we can work with them, that can ensure that the disruption doesn’t hurt the operations more than it needs to.”
Analysts said the compensation could include discounts on future jet purchases as well as cash payments.
Smith said that 15 to 20 percent of the 787 deliveries this year would come in the rest of the second quarter, as Boeing starts to push out the 25 jets that have been held up at its factories by the battery problems.
Hiroko Tabuchi contributed reporting from Tokyo