Boeing cruises past forecasts as margins, sales grow

Boeing Co`s quarterly profit surged past Wall Street estimates and booming demand for commercial jets pushed the company to raise its forecasts for cash flow and earnings for the year.

The world`s biggest planemaker played down concerns around rising costs of metals, after manufacturer Caterpillar unnerved stock markets on Tuesday by warning that rising materials costs could squeeze profit margins.

"We`re not seeing anything there that`s a material effect right now," Chief Executive Officer Dennis Muilenburg said.

Boeing`s core earnings, which exclude certain pension costs, jumped to $3.64 per share from $2.17 per share a year earlier, dwarfing a consensus forecast of $2.58 per share according to Thomson Reuters I/B/E/S.

Shares jumped as much as 4.5 percent to $344.01 in response.

U.S. President Donald Trump`s crackdown on steel and aluminium imports has constrained supplies in the domestic market, inflating costs of the metals.

Muilenburg said he does not anticipate a full-blown trade war between the United States and China, as both countries seem to working towards finding negotiated solutions.

"While some initial statements have been made about potential tariffs, none of those severe actions have been implemented. And we`re frankly encouraged by the continuing dialogue," he said.

Speaking as Europe`s Airbus confirmed an increase in its production plans for its narrowbody A320 jet, Muilenburg said Boeing continued to see upward pressure on production of the competing 737 but would be "disciplined" in output decisions.

Boeing has faced some disruption in engine and fuselage supplies for the popular jet but is confident of meeting its existing production targets which are underpinned by a record backlog of orders and strong demand, Muilenburg said.

Boeing sold a record 763 aircraft last year and has already announced a rise in commercial deliveries in the first three months of the year.

It raised its full-year operating cash flow forecast to $15.0 billion-$15.5 billion from about $15 billion, previously.

The company also increased its 2018 core earnings per share forecast to $14.30-14.50 from its previous projection of $13.80-$14.00.

Core operating margin rose to 10.7 percent from 8.5 percent a year earlier while revenue rose 6.5 percent to $23.38 billion, beating expectations of $22.26 billion.

The results follow those of heavy equipment maker Caterpillar, which cautioned it would not have the same pricing power to pass on increased costs of material such as steel.

"The good thing is that Boeing tends to have multi-year contracts in place, general inflationary adjustments on sales, and raw materials are a relatively modest portion of a plane`s costs," Morgan Stanley analyst Rajeev Lalwani said.

Boeing`s commercial aircraft deliveries rose 9 percent to 184 in the first quarter ended March 31, due to strong demand from airlines dealing with booming passenger air travel.

The company also said it planned to increase production on its 767 aircraft program from 2.5 to 3 per month beginning in 2020, reflecting strength in the global cargo market.

Global freight traffic grew on average by 7.7 percent in January and February, marking the strongest start to the year since 2015, according to the International Air Transport Association.

Up to Tuesday`s close, Boeing`s stock had risen 11.6 percent this year, compared with a 1.1 percent decline in the Dow Jones Industrial Average index.

(This article has not been edited by Zeebiz editorial team and is auto-generated from an agency feed.)