Boeing earnings, revenues soar in third quarter

Higher commercial aircraft deliveries Wednesday helped drive both Boeing revenues and earnings higher than Wall Street expectations for the third quarter.

The company announced earnings before pension contributions and other expenses of $2.14 a share Wednesday. That’s a 19 percent increase over the same quarter last year and significantly higher than the Wall Street average prediction of $1.97 a share.

Revenues rose 7 percent to $23.78 billion compared with $22.13 billion in 2013’s third quarter. Wall Street had predicted revenues of $23.02 billion as reported by Thomson Reuters.

“Continued strong operating performance across our production and services business drove significant growth in earnings per share and enabled us to continue to capture new business, pushing our order backlog to a record $490 billion,” said Boeing Chairman Jim McNerney.

The aerospace giant’s strong third quarter financial performance and rising output at its commercial aircraft factories led the company Wednesday to raise its estimate of full year 2014 earnings by 20 cents a share to a range of between $8.10 and $8.30 a share.

But the earnings failed to impress investors as the stock price dropped 4.5 percent, falling $5.67 to close at $121.45, apparently driven by two details in the earnings report:

First, costs deferred to the future in accounting for 787 Dreamliner production continued to rise beyond the peak of $25 billion Boeing had set a year ago.

Second, the company’s projection of increased cash flow ahead was lower than analysts had hoped.

An increasing share of Boeing’s earnings and revenues are attributable to its Puget Sound-based Commercial Airplanes division. That division’s revenues rose by 15 percent in the past quarter to a record $16.1 billion. The company said its operating margins in the division were 11.2 percent.

Boeing raised its output this year at its Renton 737 airliner plant to a record 42 planes monthly. It announced further plans to ramp up production to 47 of the twin-engine, single-aisle planes in 2017 and to 52 a month a year later. The company expects to deliver a record number of commercial airliners this year, between 715 and 725. The vast majority of those will be built in Puget Sound.

The company is raising production in response to airline demand for its planes. The company booked net orders for 501 commercial planes in the third quarter. It has orders on the books for 5,500 aircraft valued at $430 billion.

The company’s other major division, Defense, Space and Security, which once produced half the company’s revenues, has shrunk with defense cutbacks while the commercial aircraft division has grown with demand for planes, especially from Asia.

Total Defense, Space and Security revenues dropped 2 percent in the quarter to $7.91 billion, down from $8.04 billion in the same quarter last year.

The Defense, Space and Security division has maintained and even increased its operating margins as volume has dropped. In the third quarter, Boeing reported the division’s operating margins were 10.8 percent compared with 8.4 percent a year earlier.

A major share of Boeing’s defense revenues are being generated by Puget Sound-produced commercial aircraft modified for military use. Boeing, for instance, builds the Navy’s P-8 submarine-hunting patrol aircraft in Renton and at Boeing Field based on the 737 airframe. The company is developing the Air Force’s new aerial tanker based on the commercial 767 aircraft. That aircraft is being built at Boeing’s Everett plant.