Analysts are closely watching the deferred production cost for Boeing 787 Dreamliner, which declined by $150 million to $27.5 billion,
The world’s largest airplane manufacturer, Boeing has reported its third quarter results which have defied analysts’ profit expectations. Strategic cost cutting has offset declining revenues.
Boeing has reported that it would produce more commercial planes than it originally planned this year. Its cash flow will see a continuous rise till the end of this decade.
Just as analysts expected, Boeing resisted plans of cutting the production of its profitable 777 jets to adjust for slowing sales and the transition to the successor 777X.
Boeing now plans on cutting the production of the 777 to 7 a month from next year from the current. 8.3 a month. As per Dennis Muilenburg, Boeing’s CEO, if Boeing were to cut it down to 5 a month, the company would have sold 90% of production slots in 2018.
“I see that as a bounding case,” said Muilenburg.
This naturally means that Boeing production rate would not need to go any lower. If this were to happen, deliveries would fall to 3.5 a month.
Muilenburg went on to add, Boeing would get more clarity on the issue in the next couple of months when sale campaigns will be concluded.
According to Boeing’s CFO, the company’s revenues are likely to dip slightly next year.
Strong Bottom Line
Boeing’s operating cash flow rose by 12% to $3.2 billion with Boeing affirming of reaching its stated target of $10 billion plus this year.
According to analysts Boeing’s cash position will act to reassure investors, however, given the recent rally in its stock, the potential for further rise is limited.
“Sentiment and positioning (in the stock) do not appear particularly negative and we do not believe the stock is set up to run away,” wrote Seth Seifman, an analysts at JP Morgan in a note to clients.
Analysts are closely watching the company’s deferred production cost for the 787 Dreamliner, which declined by around $150 million in this quarter to $27.5 billion.
This essentially means that Boeing has made the 787 Dreamliner more profitable by adopting accounting measures. The balance has peaked at $28.7 billion in the first quarter and since then has declined.
In its defence business, revenues and profit have fallen slightly partly due to the discontinuation of the C-17 transport plane.
Boeing’s adjusted earnings, which exclude some pension and other costs, have risen by 39% to $3.51 per share, including a tax gain of 70 cents a share it received by claiming more depreciation than it had previously.
Leaving that out, its core earnings rose to $2.81 a share from analysts’ expectations of $2.62, according to Thomson Reuters I/B/E/S.
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