Aerospace giant Boeing Co.’s fourth-quarter profits plunged 84 percent, weighed down by charges for shutting down production of its 717 jet and losing out on an aerial tanker contract with the Pentagon.
The results reported Wednesday still easily exceeded Wall Street’s expectations as earnings and sales rose at its defense unit, now by far its biggest business. But the commercial airplanes division lost money during the quarter on charges and a decline in deliveries.
Boeing said it foresees a long-awaited recovery in the commercial airplane market starting next year and forecasts that it will deliver between 375 and 385 airplanes next year — up from this year’s estimate of 320. The company’s stock rose modestly after that upbeat assessment.
CEO Harry Stonecipher said the improved outlook can be attributed largely to increased demand for Boeing’s 737s and 777s, with the planned new 787 also drumming up more interest.
“Oil prices remain very high, but we are seeing increasing interest from many airlines to order new efficient airplanes to meet their needs for capacity growth and also improve the efficiency of using the oil that’s becoming so expensive,” he said on a conference call.
Net earnings for the October-through-December period were $186 million, or 23 cents per share, down from $1.13 billion, or $1.40 per share, a year earlier.
Analysts surveyed by First Call had estimated earnings at 5 cents per share.
Revenues increased 1 percent to $13.3 billion from $13.2 billion.
Results included a 12-cent tax benefit and charges totaling 44 cents per share — approximately $377 million — for ending 717 production next year and for expenses on refitting 767s intended to be used as aerial refueling tankers for the Air Force.
The Pentagon scrapped that $23 billion tanker deal in November amid a corruption scandal involving former Air Force official Darleen Druyun, who is serving a nine-month prison sentence after admitting to giving Boeing special treatment on the contract before being hired by the company.
The company estimated 2005 earnings at between $2.40 per share and $2.60 per share, in line with analysts’ expectations of $2.54 per share. Its forecast of $58 billion was slightly above the Wall Street estimate of $57.8 billion.
Boeing said it sees “healthy market conditions” in defense and commercial airplanes after a long period of sluggish industry demand.
“Global commercial airplane markets are improving with higher deliveries forecast for 2006 and further delivery improvement expected in 2007,” the company said in its statement. “Development of the 787 is timed for delivery into strong markets in 2008.”
The company has announced numerous recent orders for the 787, renamed last week from the 7E7, giving it a boost at a time when rival Airbus SAS is preparing to release the A380 “superjumbo.”
Morningstar analyst Chris Lozier said the prediction of a big jump in airplane deliveries starting next year is noteworthy evidence of Boeing being on the rebound after losing ground to rival Airbus, which surpassed it in deliveries for the first time in 2003 and outperformed it again last year.
“The commercial market we knew was on the upswing,” he said. “It was just a matter of how much of the upswing Boeing was going to collect. For a while it looked like Airbus was going to continue to take market share, but now it looks like Boeing is going to stand its ground.”
For the full year, net income was $1.87 billion, or $2.30 per share. That more than doubled the net earnings of $718 million, or 89 cents per share, in 2003 when Boeing took big hits from slumps in both the airline industry and its rocket and launch businesses. Revenue climbed 4 percent to $52.5 billion from $50.3 billion.