Boeing cruises past profit forecasts

profit surged past Wall Street estimates in the first quarter and booming demand for commercial jets pushed the world’s biggest plane maker to raise forecasts for cash flow and earnings.

Speaking after the results, chief executive Dennis Muilenburg played down concerns expressed by fellow U.S. export giant Caterpillar about rising materials costs, which could squeeze profits.

Boeing’s core earnings, which exclude certain pension costs, jumped to US$3.64 per share from US$2.17 a year earlier, dwarfing a consensus forecast of US$2.58 per share and sending its shares as much as 4.5-per-cent higher.

“We’re not seeing anything there (in costs) that’s a material effect right now,” Muilenburg said.

U.S. President Donald Trump’s crackdown on steel and aluminum imports has constrained supplies in the domestic market, inflating costs of the metals.

Muilenburg said he does not anticipate a full-blown trade war between the U.S. and China, as both countries seem to working toward finding negotiated solutions.

“While some initial statements have been made about potential tariffs, none of those severe actions have been implemented. And we’re frankly encouraged by the continuing dialogue,” he said.

Boeing was seen by investors as one of the big potential losers when Trump unveiled a 10-per cent tariff on aluminum on March 8, but those worries have eased somewhat.

“The good thing is that Boeing tends to have multiyear contracts in place, general inflationary adjustments on sales, and raw materials are a relatively modest portion of a plane’s costs,” Morgan Stanley analyst Rajeev Lalwani said.

Analysts also say Chinese buyers, who account for more than 20 per cent of Boeing sales, would have no alternative supplier if trade relations threatened ties with the U.S. firm, because rival Airbus has only limited capacity to produce more quickly in the near term.

Boeing has faced some disruption in engine and fuselage supplies for the popular 737 jet, but is confident of meeting its existing production targets which are underpinned by a record backlog of orders, Muilenburg said.