Boeing revved up cash flow and raised its profit forecast, soothing shareholder concerns over an operating loss in its defense business and production stumbles with the company’s best-selling 737 jets.
Free cash flow jumped 37 percent to $4.1 billion in the third quarter, more than double analysts’ estimates. The planemaker also reported higher-than-expected earnings, raised its annual profit forecast and predicted that sales would reach a record $100 billion.
The results underscored the strength of Boeing’s commercial-aircraft business as the world’s largest aerospace company benefits from booming global demand for air travel and a $491 billion order backlog. For now, at least, investors looked past an operating loss at the defense business after Boeing booked $691 million in accounting charges for two high-profile contract wins from the Pentagon.
“There is a lot going on under the hood in Boeing’s Q3 but with regard to what the market cares about most — that Boeing generates a lot of cash — the results delivered,” Seth Seifman, an analyst at JPMorgan Chase, said in a note to clients Wednesday.
The shares climbed 3.2 percent to $361.30 at 12:20 p.m. in New York, the biggest gain on the Dow Jones Industrial Average. Boeing rose 19 percent this year through Tuesday, bucking a selloff that afflicted other industrial titans such as 3M, Caterpillar and DowDuPont.
Investors have increasingly focused on free cash flow since Boeing earnings are adjusted for pension expenses and the company has pledged to plow an equivalent amount into shareholder returns. But the cash bonanza’s durability was called into question as the company failed to boost its full-year outlook for the measure.
During the third quarter, Boeing spent $2.5 billion on its own stock and paid $1 billion of dividends. The results were bolstered by a $412 million one-time tax benefit related to an audit in 2013 and 2014. The company also got a cash gain from a decline in the balance of inventory and factory costs for the 787 Dreamliner, which dropped $667 million to $23.6 billion.
Adjusted earnings rose to $3.58 a share, Boeing said in a statement. Analysts had expected $3.47, according to the average of estimates compiled by Bloomberg. Revenue climbed 3.8 percent to $25.1 billion, topping the $23.9 billion analysts had predicted.
