Boeing profit jumps 18 pct; raises 2014 earnings view

By Alwyn Scott

(Reuters) - Boeing Co reported an 18 percent increase in quarterly profit and raised its full-year core earnings forecast for the third time, reflecting booming commercial aircraft demand and increasing profitability in its defense business.

But shares of the Chicago-based aerospace and defense giant slipped 1.5 percent in early trading, as analysts viewed the profit gain as a given and raised concern about signs that the costs of the 787 Dreamliner were creeping higher.

The company earned $1.36 billion, or $1.86 per share, for the third quarter ended Sept. 30, up from $1.16 billion, or $1.51 per share, a year earlier.

Core earnings, which exclude some pension and other costs, rose to $2.14 per share from $1.80, easily topping analyst forecasts of $1.97, according to Thomson Reuters I/B/E/S.

Revenue rose 7 percent to $23.78 billion.

Commercial aircraft deliveries rose 9 percent to 186, but the operating margin in the division narrowed to 11.2 percent from 11.6 percent, reflecting the effect of deliveries of lower-margin 787 and 747 aircraft in the quarter, Boeing said.

The margin decline and cash losses on the 787 that exceeded his forecast "could dampen the stock reaction," Joseph Nadol, an analyst at JPMorgan, said in a note.

A relatively small increase in the company's full-year cash flow outlook and higher deferred production costs for the 787 "will increase the bear calls," Peter Arment, analyst at Sterne Agee, said in a note. But he expects Boeing to improve cash flow and margins in 2015, which should help the share price rise.

Boeing shares were down 1.5 percent at $125.16 in early trading on the New York Stock Exchange.

For 2014, the company said it expects core earnings between $8.10 and $8.30 per share, up from its earlier forecast of $7.90 to $8.10.

Sales fell 2 percent to $7.9 billion at Boeing's defense, space and security business, reflecting continued pressure from cuts in government spending. But Boeing was able to boost profit 27 percent and operating margins by 2.4 percentage points in the unit by cutting costs.

Investors have been watching Boeing's ability to return cash to shareholders through dividends and share buybacks. The company spent $1 billion on share repurchases in the quarter, and another $500 million on dividends.

Boeing's full-year revenue forecast remained unchanged at $87.5 to $90.5 billion. Boeing trimmed its sales forecast for military aircraft for the full year to $13.7 billion from $14.2 billion, but raised its outlook for its global services and support business to $9.1 billion from $8.6 billion.

Boeing left unchanged its full-year forecast for commercial aircraft deliveries and sales, expecting between 715 to 725, and revenue of $57.5 billion to $59.5 billion.

(Reporting by Sweta Singh in Bangalore and Alwyn Scott in Seattle; Editing by Sriraj Kalluvila and Jonathan Oatis)