Boeing forecasts 2016 earnings below estimates; shares tumble

Reuters with CNBC
Boeing beats the Street

Boeing, said on Wednesday it would deliver fewer planes in 2016 and forecast earnings below expectations, sending shares tumbling as much as 10 percent to a 52-week low.

The world's biggest planemaker also reported weaker fourth-quarter profit, mainly due to a charge announced last week for slowing production of the 747-8 jumbo.

Boeing expects to deliver 740 to 745 planes in 2016, its centenary year, down from a record 762 in 2015. It will build fewer 737s as it shifts that factory to the upgraded 737 MAX. It also is cutting 747-8 output in response to weak demand.

737 Max Hero Boeing
Source: Boeing

Boeing forecast 2016 core earnings, excluding some pension and other costs, between $8.15 and $8.35 per share, below the average analyst estimate of $9.43, according to Thomson Reuters I/B/E/S.

Its forecast for about $10 billion in operating cash flow in 2016 raised concern among analysts.

"Whilst we don't expect this to negatively impact Boeing's existing plans to return cash to shareholders, it could create doubt as to the sustainability of these plans," RBC analyst Robert Stallard wrote in a note.

He added that Boeing still faced a likely cut to 777 production as it begins building the successor 777X in 2017. He also cited the risk of an "impact from an aerospace downturn if this should occur at some point before the end of this decade."

Others on Wall Street, however, saw the results and forecast as solid. "We are buyers of Boeing on the weak headline EPS number," said Peter Arment, an analyst at Sterne Agee CRT.

Boeing's net income fell to $1.03 billion, or $1.51 per share, in the fourth quarter, from $1.47 billion, or $2.02 per share, a year earlier.

Core earnings declined to $1.60 per share from $2.31, reflecting a charge for slowing production of the 747-8 jumbo jet. Wall Street looked for core earnings of $1.26 per share, according to Thomson Reuters I/B/E/S.

Both figures reflected the aftertax charge of $569 million, or 84 cents a share, for cutting 747-8 output to six planes a year from 12, starting in September 2016.

Fourth-quarter revenue fell about 4 percent to $23.57 billion. Analysts expected $23.53 billion, according to Thomson Reuters I/B/E/S.

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Shares were down almost $12.03 at $115.70 on the New York Stock Exchange and fell as low as $115.02. Its 52-week high is $158.83.

Boeing's quarterly report comes on the heels of an announcement last week that the airplane manufacturer will take a $569 million after-tax charge in its fourth-quarter results as it scales back production of its 747-8. Citing sluggishness in the air cargo market, the company said it will only produce one of that aircraft every two months beginning in September — from one every month previously.

"Global air passenger traffic growth and airplane demand remain strong, but the air cargo market recovery that began in late 2013 has stalled in recent months and slowed demand for the 747-8 Freighter," Ray Conner, Boeing's vice chairman, said in a statement at the time of the announcement.

The latest generation of Boeing's best-selling 737 aircraft, however, is a major cash generator for the company. It had 3,072 firm orders at the end of 2015, more than half of Boeing's 5,795-plane backlog.

Earlier in the week, Boeing said that it had tentatively scheduled the first flight of its newest airplane, the 737 MAX, for Friday, a sign that it is on schedule for another key milestone for its top-selling plane. The Chicago-based company said it finished key development steps, readying the plane for its first takeoff. It is due to be delivered to airlines starting in 2017.

— CNBC's Jacob Pramuk contributed to this report.