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Boeing's Q3 Profit Jumps 18 Percent

Boeing reported an 18 percent increase in quarterly profit and raised its full-year core earnings forecast for the third time, reflecting strong commercial aircraft demand.

In the quarter ended September 30, Boeing earned USD$1.36 billion, up from USD$1.16 billion a year earlier.

Commercial aircraft operating margins narrowed to 11.2 percent from 11.6 percent, reflecting the effect of deliveries of lower-margin 787 and 747 aircraft, Boeing said.

But Boeing shares slipped 4.3 percent as analysts viewed the profit gain as a given and were more concerned that costs of the 787 Dreamliner are creeping higher, while the company's cash generation was low.

Last year, Boeing booked USD$9.7 billion in operating cash flow before pension contributions, compared with a forecast of more than USD$8.5 billion.

But this year Boeing has a lower forecast of more than USD$7 billion and in the first nine months has booked only USD$4.6 billion. For comparison, it had already booked USD$8.3 billion at the nine-month stage in 2013.

"Where's the cash?" RBC Capital Markets Analyst Robert Stallard asked in the headline of a note to clients.

Boeing Chief Financial Officer Greg Smith said cash flow would be "very strong" in the fourth quarter. He didn't provide details, and Boeing's official forecast rose to "more than USD$7 billion" from "about USD$7 billion."

Smith also "laid out some pretty clear operating reasons for why the 787 is not going to see a massive or rapid shift in cash returns over the next year or so," Stallard told Reuters news agency. Boeing is stocking up on parts for its 787-9 model, and would try to do the same with the -10 variant, as a way to lower the risk of production problems, and that will consume cash, Smith said.

The deferred production costs of the 787 now appear likely to reach USD$26 billion, up from the USD$25 billion Boeing had forecast, analysts suggested. Smith didn't contest the number but said he didn't see the cost reaching USD$27 billion.

(Reuters)