Record Earnings, Order Backlog Overshadow 787 Concerns

Despite record sales and a years-long production backlog, Boeing has seen its stock price drop 20 percent in New York Stock Exchange composite trading since its original October 10 announcement the 787 Dreamliner would be delayed. It probably comes as little consolation that Airbus is down 23 percent in the same period, or that stock markets in general have fallen.

Boeing took what it hopes will be a big step towards rebuilding shareholder confidence Wednesday, however, as the planemaker reported an 84 percent increase in 2007 net income, to a record $4.1 billion, or $5.28 per share, up from $2.2 billion, or $2.85 per share, in 2006 on higher commercial airplane deliveries, strong growth in defense earnings, company-wide productivity improvements, and other charges recorded in 2006.

In a conference call with investors, Boeing Chairman, President and CEO Jim McNerney said revenue rose eight percent to a record $66.4 billion, while the operating margin expanded to 8.8 percent driven by double-digit margins in Boeing's commercial airplanes and defense businesses. Fourth-quarter revenue held at $17.5 billion while the operating margin increased to 8.7 percent driven by margin expansion in its core businesses. Operating earnings grew 32 percent, while earnings per share increased 5 percent to $1.36 per share, affected by a higher effective tax rate.

Boeing also raised its 2008 earnings per share projections to between $5.70 and $5.85, due to what the planemaker says are productivity gains realized ahead of earlier plans.

"Our 2007 results demonstrate the kind of quality financial performance we can achieve through our simultaneous focus on growth and productivity," said Chairman, President and Chief Executive Officer Jim McNerney (right).

"We added substantial backlog, made major efficiency gains, and executed well on our production and services programs. Despite some development program challenges, we are a strong company growing stronger, and we expect continued improvement in our financial results in 2008 and beyond."

Some industry analysts believe the true measure of regaining investor confidence, however, will be in the development of the composite Dreamliner. Ahead of Wednesday's conference call, Teal Group analyst Richard Aboulafia told Bloomberg expressions of confidence from Scott Carson, Boeing's commercial plane unit CEO, will no longer be enough.

"They need to come up with numbers and dates that everyone feels comfortable with," he warned, "and McNerney needs to put his stamp on it, as soon as possible."

In Wednesday's announcement, McNerney fell short of an iron-clad guarantee Boeing will meet its latest projections for 787 development. "I'm more involved now," McNerney said. "Part of my job is to get involved when help is needed and that's been the case with the 787 over the past two months."

McNerney added Boeing will discuss the 787 production and delivery schedule during a forthcoming conference call on its first-quarter earnings, reports Bloomberg.

FMI: Download The Full Earnings Statement (.pdf)