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Abu Dhabi, UAEMonday 25 June 2018

Boeing shares rise sharply as second quarter profit takes off

The stock has soared 37 per cent this year

Visitors take pictures of a model of Boeing's 787 Dreamliner during Japan Aerospace 2016 air show in Tokyo. Reuters
Visitors take pictures of a model of Boeing's 787 Dreamliner during Japan Aerospace 2016 air show in Tokyo. Reuters

Boeing posted second-quarter profit and cash growth that beat analysts' estimates on Wednesday, even though sales were less than expected, sending shares up sharply.

The world's biggest plane maker is cutting costs by streamlining production of new 737 MAX models and finishing development of other new planes. Rising profitability of its 787 Dreamliner contributed about US$530 million in cash in the quarter.

Boeing shares jumped nearly 4 per cent at $220.65 in premarket trading. The stock has soared 37 per cent this year.

Analysts focused on Boeing's abundant cash from operations, which at nearly $5 billion in the quarter was about double estimates of about $2.5bn.

"Monster cash flow," said analyst Robert Stallard at Vertical Research. The results were "about as close to perfect as it gets from Boeing," he added.

Military aircraft sales fell 4 per cent to $6.8bn, but profit jumped 50 per cent and margins widened 4.6 percentage points.

The extra cash allowed Boeing to add $1.5bn to its operating cash flow forecast for the year, raising it to about $12.25bn. Boeing will increase share buybacks this year by $3.5bn, to about $10bn. And it will make $3.5bn in additional pension contributions this year to reduce future costs.

Boeing said it will cut full-year capital expenditure by $300m, but that was expected since the company has made most of the big investments in its 777X wing factory and the 737 MAX and 787-10 programsme, said the analyst Richard Aboulafia at Teal Group.

The company lifted its full-year forecast for core earnings, which exclude some pension costs, by 75 cents to between $11.10 and $11.30 a share, its second upward revision this year.

Boeing swung to a profit of $1.76bn, or $2.89 per share, in the second quarter, from a loss of $234m, or 37 cents per share, a year earlier.

Last year's results included more than $2bn in charges related to the 787, 747 and KC-46 tanker aircraft programmes.

Core earnings, which excluded some pension and other costs, were $2.55 per share in the quarter.

Revenue fell 8.1 per cent to $22.74bn.

* Reuters