Boeing Co. surprised investors with a bigger-than-expected fourth-quarter profit on Wednesday, and said testing of its two newest planes is on track.
Boeing also said it won't scale back aircraft production, which some had feared. Its guidance for 2010 profits was less than analysts had expected, but investors didn't seem to mind. Boeing shares rose $3.21, or 5.6 percent, to $60.92 in afternoon trading.
Boeing's backlog of airplane orders is carrying it through a steep downturn in airline traffic, which has made carriers much more conservative about ordering new planes. Airlines order jets years before delivery, so Boeing can keep building new planes to fill old orders, even if new orders slow. Boeing expects to build more planes than it takes new orders for in 2010 — as it did in 2009 — said Jim McNerney, Boeing's chairman, president, and CEO, on a conference call with analysts.
Thanks to those previous orders, all the planes they'll build this year are sold out. And "customer discussions are not slowing down, they're at a good level, if not, a little stronger" than last year, he said.
Airlines have struggled during the recession, and aircraft orders have fallen. The International Air Transport Association said Wednesday that airlines saw passenger demand drop 3.5 percent, the worst falloff the industry has recorded.
Boeing and European rival Airbus dominate the market for large commercial jets. Last year Airbus delivered 498 planes, versus 481 for Boeing.
Boeing's new 787 flew for the first time last month, and flight testing is under way on the first two planes. It's on track to meet its weight goals, McNerney said. Some people have wondered if that would happen. The plane's weight is a factor in its fuel efficiency, which is one of the 787's main selling points.
"We don't anticipate any major modifications to the airplane," McNerney said.
Referring to the 787 flight tests, he said, "So far, so good."
"We're moving along as expected. We have not discovered anything significant in the design or the fabrication of the airplane," he said. "There's still risk in the flight test program, as you know. Something could be discovered. We don't anticipate it."
Boeing said it plans to fly its new 747-8 "in the near future." The new version of its 41-year-old plane is longer and can fly farther than its predecessors. It plans to deliver a handful of both the new 747 and the 787 by the end of this year.
Boeing made a profit of $1.27 billion in the fourth quarter, reversing an $86 million loss from a year ago. The per-share profit of $1.75 was ahead of analyst expectations as measured by Thomson Reuters. Revenue rose 42 percent to $17.94 billion. Results in last year's fourth quarter had been held down by a strike and a charge for delays on the 747-8.
The Boeing Commercial Airplanes division saw operating profits rise to $1.02 billion, reversing a year-ago loss of $968 million. Operating profits in Boeing's defense unit fell 6 percent to $829 million.
Boeing, which is based in Chicago, gave a cautious outlook for 2010 after dealing with program delays and declining orders in 2009. It expects to earn $3.70 to $4 per share this year. Wall Street analysts forecast $4.26.
Boeing predicted 2010 revenue of $64 billion to $66 billion, which is about what analysts expected.
Boeing said the guidance accounts for lower production of its 777 aircraft, some smaller defense programs, and "market risks."
It had planned to lay off about 10,000 people last year, but ended up dismissing 9,300, McNerney said.
"Our plan reflects ongoing headcount reductions in light of continued market pressures and related productivity requirements," he said.