Boeing is restoring at least a little confidence in the outlook for U.S. industrial companies.
The planemaker smashed profit estimates and boosted its forecast for cash and earnings, pushing shares to the biggest gain on the Dow Jones Industrial Average. The strong performance reassured investors that perhaps the market hasn’t peaked for all manufacturers — an appealing message a day after Caterpillar Inc. said the first quarter would be the “high watermark” for 2018.
“There are broader concerns with trade and companies calling the top of the market,” Ken Herbert, an aerospace analyst at Canaccord Genuity, said in an interview Wednesday. “But this was very clean and very strong.”
The robust results underscored the strengths that made Boeing the best performer on the Dow for most of the past year. The company was recently dethroned by Cisco Systems as President Donald Trump’s trade salvos rattled markets. Investors sold off Boeing as aluminum prices went on a wild ride, and again when China threatened penalties for the 737, the manufacturer’s largest source of profit.
None of the aerospace-related tariffs have been implemented, Boeing Chief Executive Officer Dennis Muilenburg reminded analysts during an earnings call Wednesday. “We’re hopeful for a positive outcome from the discussions between the U.S. and China,” he said.
The shares climbed 2.8 percent to $338.12 at 1:09 p.m. in New York. Through Tuesday, they had gained 12 percent this year, while the Dow fell 2.8 percent.
Free cash flow climbed to $2.74 billion, Chicago-based Boeing said in a statement. That topped the average analyst estimate of $1.49 billion, a sign the company’s underlying business remains healthy.
Earnings top estimates
Adjusted earnings rose to $3.64 a share, handily beating the $2.58 average of estimates compiled by Bloomberg. Revenue increased 6.5 percent to $23.4 billion. Analysts had predicted $22.2 billion.
“Well it’s not every day that a mega-cap company beats consensus by 40 percent,” Robert Stallard, an analyst with Vertical Research Partners said in a note to clients. But crushing estimates “by such a large amount also raises the risk that Boeing’s guidance will be increasingly ignored.”
There are signs of strain, however, as engine makers and other suppliers struggle to keep pace with the record production tempo for the single-aisle 737. Almost half of Boeing’s 184 jet deliveries in the quarter occurred in March, after a sluggish start. The company delivered 35 of the upgraded 737 Max planes in the quarter, nine fewer than Credit Suisse had expected.
Despite the early hiccups in shipments of engines and fuselages for the Max, Boeing expects the aircraft to account for about 40 percent to 45 percent of its single-aisle deliveries this year, Boeing Chief Financial Officer Greg Smith told analysts.
“We’re confident that we’ll continue to ramp up and hit our delivery marks,” he said.
Boeing has worked hard to improve productivity in its factories, while making good on pledges to increase cash flow and share the gains with shareholders. Deferred production costs for the 787 Dreamliner fell $668 million to $24.7 billion, freeing up cash.
