(Reuters) - Boeing (BA.N) shares jumped on Wednesday after the world’s largest planemaker reported stronger-than-expected quarterly profit and cash flow, helped by soaring demand from airlines and solid defense sales and services, and raised its 2018 sales and profit estimates.
Demand from commercial airlines has driven a surge in revenue, pushing shares up by roughly a third over the past 12 months. Boeing shares were up 3.3 percent to $361.51 after rising nearly 5 percent earlier, helping limit losses on Wall Street.
A $691-million charge tied to Boeing’s MQ-25 refueling drone and T-X training jet defense programs just weeks after it won the latter contract in cooperation with Sweden’s Saab AB (SAABb.ST) took some of the shine off Boeing’s results, however.
“Today’s results are all the proof you need that they have a an enormously successful commercial business that’s allowing for very aggressive pricing on the defense side,” said aerospace analyst Richard Aboulafia of the Teal Group.
Boeing said the stronger cash flow was primarily driven by timing of receipts and expenditures as well as planned higher commercial airplane production rates.
On a call with analysts, Boeing Chief Executive Dennis Muilenburg played up the T-X and MQ-25 wins as long-term growth plays. He repeated his promise to boost production rates on the best-selling 737 narrowbody next year despite supplier delays that left dozens of semi-finished jets parked outside a Seattle-area factory.
“We’re seeing positive signs in our supply chain recovery and remain confident on the overall 737 production profile and ramp up plans,” Muilenburg said.
Chicago-based Boeing raised its full-year profit forecast to $14.90-$15.10 from the previous $14.30-$14.50 per share, and revenue to a range of $98 billion to $100 billion, up $1 billion. It cited defense volume and services growth for the higher forecast.
Core earnings, which exclude some pension and other costs, came in 11 cents above analysts’ average forecasts at $3.58 per share in the quarter ended Sept. 30.
Boeing has delivered 568 aircraft in the first nine months of 2018, as it works to overcome factory snarls on its best-selling 737 narrowbody, up from 554 at the end of September a year ago, putting it on track to deliver another record year of plane sales.
That keeps the manufacturer, which aims to deliver between 810-815 planes in 2018, in front of its European rival Airbus SE (AIR.PA), which delivered 503 aircraft through September this year. Airbus shares gained 2.7 percent.
Boeing recorded $176 million in additional charges in the quarter on its delay-plagued KC-46 aerial refueling tanker, bringing the total cost of the program to more than $3 billion.
It also took a $691-million charge on the MQ-25 and T-X military programs, though the charge was offset in part by a $412 million tax benefit.
Asked on the conference call whether the charge was in some way an effort to anticipate a similar situation to the KC-46, Muilenburg said, “it’s dramatically different than that.”
“These are planned, purposeful investments upfront with a commercial business case wrapped around it,” Muilenburg said.
Reporting by Ankit Ajmera in Bengaluru; editing by Patrick Graham and Nick Zieminski