UPDATE 1-Boeing stands by full-year forecast

Thu May 21, 2009 10:44am EDT

* 787 on track for first flight

* Plans to expand into adjacent defense sectors

* Shares off 3.7 pct (Adds executive quotes)

ATLANTA, May 21 (Reuters) - Boeing Co (BA.N) said on Thursday that its Dreamliner 787 was still on track for its first flight later this quarter, and the company stood by a previous full-year forecast.

The company said deliveries of new planes, including the 787, set to begin next year would hurt margins even as they produce growth longer-term.

The plane maker told its investor meeting that it planned to keep revamping itself despite the pressures on its commercial and defense businesses.

"The current market uncertainties and evolving customer requirements provide impetus to accelerate our pace of change to better compete and grow," Chief Executive Jim McNerney told the investor meeting, which was broadcast over the Internet.

Chicago-based Boeing and rival Airbus, a unit of EADS EAD.PA, are suffering as airlines and cargo operators defer plane deliveries amid weak demand in the economic recession.

Boeing said its test flight program of the fuel-efficient 787 was on schedule to begin this quarter. The plane has been plagued by repeated production delays, and James Bell, the company's finance chief, also said on Thursday that there were "more requests for deferrals."

At the same time, Boeing's defense business is challenged as the Pentagon moves to scale back or end certain programs. Just this week, the Pentagon's chief arms buyer said that the Army's Future Combat Systems modernization program, with Boeing and Science Applications International Corp SAI.N as lead system integrators, was ending in its current form.

Boeing said it would continue to pursue acquisitions to grow into adjacent defense sectors such as cybersecurity, and said any purchases would probably be in the small-to-medium-size range.

"Obviously holding on to some current production programs and re-establishing them in this new budgetary environment is going to have the most impact" in the near term as the Obama administration refocuses defense spending priorities, McNerney said.

The company said it still expected full-year earnings of $4.70 to $5 a share. Boeing had cut its 2009 forecast in April from a previous view of $5.05 to $5.35 a share, citing weakness in commercial planes.

Although the 787 and new 747-8 freighter will hurt margins initially, Bell said the two plane programs would generate "significant growth" in the longer term.

Shares of Boeing, a Dow Jones industrial average component, slumped 3.7 percent to $42.95 in morning trading on the New York Stock Exchange. (Reporting by Karen Jacobs; Editing by Lisa Von Ahn)

FILED UNDER: