Boeing [BA] yesterday reported a drop in net income despite a double-digit increase in sales in its third quarter as higher pension expense offset an otherwise strong performance at the company.
Despite the lower net income, Boeing raised its earnings and sales guidance for 2012 given a strong performance so far this year and a bright outlook, said Jim McNerney, Boeing’s chairman, president and CEO.
Net income slipped 6 percent to just over $1 billion, $1.35 earnings per share (EPS), from nearly $1 billion ($1.46 EPS) a year ago, due largely to higher pension expense of $194 million (18 cents EPS). Analysts were expecting $1.12 of EPS. Operating margin fell nearly 2 percent to 7.9 percent.
Sales increased 13 percent to $20 billion from $17.7 billion, driven by higher commercial aircraft deliveries, 149 in the quarter versus 127 a year ago.
Boeing’s Commercial Airplanes division drove the overall growth, posting $12.2 billion in sales versus $9.5 billion a year ago, a 28 percent increase due to the higher plane deliveries. The segment’s operating profits increased 6 percent to $1.2 billion, unable to keep pace with the double-digit sales growth due to the dilutive impact from deliveries of two new aircraft, the 787 and 747-8.
Contractual backlog in the commercial segment at the end of the quarter stood at $305 billion, up from $293 billion since the beginning of the year.
Boeing’s Defense, Space & Security segment posted lower sales and profits, with sales down 4 percent to $7.8 billion due to a delivery mix shift at the Military Aircraft unit and lower volume on the Army’s Brigade Combat Team Modernization program.
Defense segment profits were relatively flat, up just $3 million to $827 million, as double-digit gains in the Military Aircraft unit were largely offset by double-digit declines at Network & Space Systems, and Global Services & Support units.
Contractual backlog in the defense business stood at $52 billion at the end of the quarter, up from $46 billion since the beginning of the year. International business accounts for 38 percent of the defense segment’s total backlog.
While the outlook for defense spending in the United States remains constrained, McNerney said this is mitigated somewhat by international defense demand.
McNerney said that Boeing is working with its supply chain to further wring cost out of operations and to improve performance so that his company, its suppliers and customers benefit.
Boeing raised its financial expectations for the year based on strong core operating performance and a better sales mix across all of its defense business units. Earnings are now expected to be between $4.80 and $4.95 EPS versus prior guidance of $4.40 to $4.50.
Sales are now expected to be between $80.5 billion and $82 billion versus $79.5 billion and $81.5 billion predicted earlier. Operating cash flow is expected to be greater than $5.5 billion versus earlier projections of greater than $5 billion.