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Boeing shares soar on profit, aircraft forecast but storm clouds loom


By Ankit Ajmera and Eric M. Johnson
(Reuters) - Boeing Co shares jumped on Wednesday as the world's largest planemaker raised its profit and cash flow expectations for 2019 amid a boom in air travel, while indicating it had overcome supplier delays that snarled 737 production last year.
Chicago-based Boeing said it expects to deliver between 895 and 905 commercial aircraft in 2019, up from 806 aircraft it delivered last year, which - although just below target - kept it ahead of rival Airbus SE for a seventh year.
Investors closely watch the number of planes Boeing turns over to airlines and leasing firms in a year for hints on the company's cash flow and revenue.
Despite its rosy outlook, America's biggest exporter faces possible turbulence on a number of fronts in 2019 including financial stress felt by some of its airline customers, signs of a broader economic slowdown and U.S. trade tensions with China, where Boeing ships about 1 out of 4 aircraft that it makes.
There are also unanswered questions related to the deadly crash of a Lion Air 737 MAX in Indonesia in October that thrust a spotlight on the newest version of the best-selling jet, as well as on airline training and maintenance.
Boeing's shares rose nearly 7 percent to $389.59 in trading, becoming the top gainer on the Dow Jones Industrial Average.
Boeing has starting running 787 Dreamliner assembly lines at a rate ready to support higher output of 14 jets a month, bringing it within reach of a closely-watched goal designed to boost cash and reduce costs, Boeing Chief Executive Dennis Muilenburg said on a conference call with analysts, confirming an earlier Reuters report.
Muilenburg also said he expected aircraft orders to be somewhat "moderated" in 2019 but still expected a healthy pace.
Boeing raised its full-year core earnings per share forecast to $19.90-$20.10 from $14.90-$15.10, and revenue to a range of $109.5 billion to $111.5 billion, from $98 billion to $100 billion, fueled by strong volume across its commercial, military and services businesses.
Boeing said its quarterly operating margin on commercial aircraft increased to 15.6 percent from 11.6 percent from a year ago, driven by higher 737 production and higher margins on its high-tech 787 Dreamliner widebody.
Vertical Research Partners analyst Robert Stallard said Boeing "smashes it" on margins he expects investors, who reacted favorably to 2019 projections, to return their focus to cash flow.
"With 4Q a little light, despite lower-than-expected capex, and an 'in-line' 2019 forecast, we will be interested to see if investor view this as enough," Stallard wrote.
Chief Executive Dennis Muilenburg said the company's performance provides a "firm platform" to further invest in new innovation as the aviation industry is awaiting a 2019 decision on whether Boeing will move ahead with a new mid-sized aircraft dubbed NMA.
It also said the first all-new 777X widebody flight test airplane completed final body join and power-on, and the program remains on track for flight testing this year and first delivery in 2020.
The company forecast operating cash flow between $17 billion and $17.5 billion in 2019, compared with cash flow of $15.32 billion in 2018, and above analysts' average estimate of $16.73 billion, according to IBES data from Refinitiv.
It expects 2019 core earnings between $19.90 per share and $20.10 per share, and revenue between $109.5 billion and $111.5 billion.
Those numbers indicate Boeing has largely surmounted delays getting fuselages and engines for its best-selling 737 narrowbody which snarled production over the past year. Even so, related production logjams dragged down quarterly free cash flow to $2.45 billion, below the previous year.
Boeing's core earnings rose to $5.48 per share in the fourth quarter, from $5.07 per share a year earlier, and came in above Wall Street's estimate of $4.57 per share.
Quarterly revenue rose 14.4 percent to $28.34 billion, above analysts' average expectation of $26.87 billion. Boeing's 2018 revenue surpassed the $100 billion mark for the first time in its 102-year history.
(Reporting by Ankit Ajmera in Bengaluru and Eric M. Johnson in Seattle; Editing by Sriraj Kalluvila and Nick Zieminski)

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First Published: Jan 30 2019 | 9:51 PM IST

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