Boeing Q4 Profit Falls 30 Percent On Charges

Boeing reported a 30 percent fall in quarterly profit, hurt by an after-tax charge related to its 747-8 jet production cut.

The company earned USD$1.03 billion in the fourth quarter ended December 31, down from USD$1.47 billion a year earlier.

Revenue fell about 4 percent to USD$23.57 billion.

ROUGH 2016

Boeing braced investors for a rough 2016, forecasting lower-than-expected earnings and fewer aircraft deliveries largely because of production changes needed to boost output later in the decade.

Boeing said it still sees a strong market for new aircraft despite slowing global growth and low oil prices.

It expects passenger traffic to keep rising and announced plans to notch up 737 output to 57 a month in 2019. That would be the highest level ever for the single-aisle plane, as Boeing fights to slow Airbus's inroads. It is increasing 787 and 767 production as well.

PRODUCTION CUT SURPRISE

The 737 production cut in 2016 surprised analysts who had expected Boeing to maintain rates rather than risk losing market share to Airbus.

Boeing last week announced a production cut in the 747-8, now mainly a freight aircraft, that it said will keep the line running until retirement of older planes picks up in 2019.

Boeing also said it would cut 777 output in 2017 as it switches to the upgraded 777X model, due out by 2020.

The cuts are probably no coincidence amid negative global sentiment, said Richard Aboulafia, analyst at the Teal Group. "In the here and now, there are reasons to worry," he said.

He and others saw the reductions as a sign of the difficulty Boeing has had selling the last few of the current 737 and 777 models. They noted the heavy discounting in a recent 737 sale to United Airlines.

Cutting 737 output "tells me narrow-body demand has softened a little bit," one fund manager said.

Boeing said it expects global passenger traffic to rise by 6 to 7 percent a year over the long term, above the 5 percent historical average. This would support higher production in 2017 and beyond.

Traffic rose 15 percent in China in the fourth quarter, even as its economy slowed, chief executive Dennis Muilenburg said.

"Stepping up to 57 a month in 2019, continues a trend of confidence we see in the narrow-body market place in particular," Muilenburg said. "All of that is telling us that continuing to ramp up production to keep supply and demand in balance is the right thing to do."

For 2016, Boeing's centenary year, the company expects to deliver 740 to 745 planes, down from the 762 in 2015.

"It's not as if they're wildly over-producing," said Charlie Smith, chief investment officer at Fort Pitt Capital. "Backlog is 5,800 airplanes."