Boeing profits surge but tougher 2014 awaits as 2013 windfall, US budget cuts weigh heavy
January 31, 2014, 12:01 am TWN
NEW YORK --U.S. aerospace giant Boeing Wednesday reported a big jump in quarterly earnings, but signaled a leaner 2014 profit outlook after last year's boom.
Boeing's fourth quarter ended on a high note, with the company achieving record annual commercial aircraft deliveries on its way to notching a 26.1-percent rise in profits compared with the year-ago period.
But Boeing's 2014 earnings forecast pointed to headwinds in both its commercial and defense divisions.
One ripple effect from the late-2013 surge in commercial deliveries was that some of the late-2013 deliveries came early and at the expense of 2014 results, Boeing executives said. As a result, the company now forecasts essentially flat 2014 per-share earnings compared with the 20-percent gain in 2013.
Also weighing on results: the continued drag of lower U.S. defense spending in the wake of government budget cuts. Boeing forecast revenues of US$30-US$31 billion in 2014 in its defense division, down from US$33.2 billion in 2013.
Boeing chief executive Jim McNerney said a late-2013 federal government budget deal brings some relief from some of the worst effects of the sharp sequestration budget cuts.
“That said, we remain very concerned about longer-term budget uncertainty and the ultimate consequences of sequestration on national security, and the potential devastating impact to the nation's industrial base,” McNerney said.
McNerney, addressing analysts for the first time since the company announced senior executive changes in December, also said he is not planning to retire “anytime soon.”
The Boeing announcement included the promotion of Dennis Muilenburg to president, fueling speculation about McNerney's plans.
“While you may be seeing more of them, it doesn't mean you'll be seeing less of me,” McNerney said.
Net earnings in the October-December period were US$1.2 billion on revenues of US$23.8 billion, compared with US$978 million on revenues of US$22.3 billion in the year-ago quarter.
Boeing reported full-year 2013 earnings of US$4.6 billion on revenues of US$86.6 billion, up 17.6 from the 2012 profits of US$3.9 billion on revenues of US$81.7 billion.
McNerney said the company has a “huge opportunity” after investing heavily in the 787 Dreamliner aircraft and other major new aircraft that are now able to be “harvested” through more cost-effective production.
Production on the 787 has reached 10 per month, but deliveries to customers are still at seven a month; the company said it wants to boost deliveries to 10 per month.
Boeing forecast 2014 earnings of US$7.00-US$7.20 per share, below analyst estimates for US$7.57. Boeing earned US$7.07 per share in 2013.
Boeing executives said 2014 earnings would also be hit by a one-time cash payment of US$300 million to Washington state workers following an agreement with the International Association of Machinists on a new long-term contract.
Boeing was the best performer in the Dow Jones Industrial Average in 2013, with shares soaring 80 percent as it benefited from a surge in airline investment, but some analysts think the company's streak is losing momentum.