The num­bers that mat­ter for Boe­ing

Financial Mirror (Cyprus) - - FRONT PAGE -

Dow Jones In­dus­trial Av­er­age com­po­nent Boe­ing Co. (NYSE: BA) re­ports fourth-quar­ter and full-year re­sults be­fore mar­kets open on Wed­nes­day. Un­til last week the prospects were pretty solid.

Then Boe­ing an­nounced a pre-tax $885 mln fourthquar­ter charge on its 747 pro­gramme and a fur­ther slow­down in pro­duc­tion of the jumbo jet from one per month be­gin­ning in March to one-half plane per month be­gin­ning in Septem­ber.

An­a­lysts had a quar­terly earn­ings per share (EPS) es­ti­mate of $2.14 prior to the an­nounce­ment, and that has now dropped to a con­sen­sus es­ti­mate of $1.26. For the full year, an­a­lysts ex­pect Boe­ing to post EPS of $7.38, com­pared with $8.60 in 2014.

The con­sen­sus fourth-quar­ter rev­enue es­ti­mate is $23.55 bln, down from ac­tual rev­enues of $24.47 bln in the year-ago quar­ter, and full-year rev­enue is ex­pected to come in at $96.09 bln, up nearly 6% com­pared with 2014 rev­enues of $90.76 bln.

While the 747 pro­duc­tion rate de­cline is not good news, it pales in com­par­i­son with pro­duc­tion rates on the cur­rent ver­sion of the 777. That plane is as close to a cash cow as Boe­ing has and the com­pany needs to keep pro­duc­ing th­ese planes at a rate of about eight a year out through 2021 in or­der to keep the cash flow­ing in.

At the end of De­cem­ber Boe­ing re­ported 176 un­filled or­ders for the 777-300ER and 42 for the 777F freighter. flow. Boe­ing has turned in­vestors into cash-flow fa­nat­ics and has stuck by its fore­cast made in Jan­uary of last year for $9 bil­lion in cash flow. That’s as close to a sure thing as in­vestors are ever likely to see. Boe­ing will have moved the prover­bial moun­tain to make this fore­cast.

One fi­nal thing to watch for is a lev­el­ling off, if not a drop, in the com­pany’s de­ferred pro­duc­tion costs. Th­ese are al­most en­tirely due to the enor­mous ex­pense of bring­ing the 787 pro­gramme to life.

At the end of the third quar­ter, Boe­ing re­ported de­ferred pro­duc­tion costs to­tal of $28.31 bln. That re­flected a quar­ter-over-quar­ter gain of around $577 mln, the small­est in­crease in more than three years. When that num­ber stops grow­ing it means that Boe­ing is no longer los­ing money on ev­ery 787 it sells; when the num­ber starts to shrink, Boe­ing will be mak­ing a profit on ev­ery 787 it sells.

As the noon hour drew to a close on Tues­day, Boe­ing’s stock traded up about 2.8%, at $127.46 in a 52-week range of $115.14 to $158.83.

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