Boeing [BA] on Wednesday posted strong third quarter top and bottom line results with its commercial aircraft business driving the sales gains and its defense segment boosting earnings.

Sales increased 9 percent to $25.8 billion from $23.8 billion a year ago due primarily to higher deliveries of commercial airplanes but also to contract negotiations on the F-15 aircraft and higher volume on NASA’s Commercial Crew Program to provide access to and from the International Space Station and low-Earth orbit.

Net income climbed 25 percent to $1.7 billion, $2.47 earnings per share (EPS), from $1.4 billion ($1.86 EPS). Stripping out unallocated pension expenses, core earnings rose 9 percent to $2.6 billion ($2.52 EPS), well above consensus estimates of $2.21 EPS. Per share results benefitted too from a slower share count due to Boeing’s stock repurchases.

Boeing's F-15 Strike Eagle. The aircraft helped boost company sales in the third quarter. Photo: Boeing
Boeing’s F-15 Strike Eagle. The aircraft helped boost company sales in the third quarter. Photo: Boeing

Boeing’s Defense, Space & Security segment drove the bottom line gains with a 19 percent increase in operating income to just over $1 billion, on higher margins in its Military Aircraft, and Network & Space Systems divisions due to volume increases and performance improvements. Operating margin at the segment was up 140 basis points to 12.2 percent.

Sales in the defense segment were up 6 percent to $8.4 billion, with 35 percent from foreign customers as international demand for the company’s products remains strong in the Middle East and Asia-Pacific regions, Dennis Muilenburg, president and CEO of Boeing, said on the company’s earnings call.

The Commercial Airplanes segment posted a nearly 2 percent decline in operating income to $1.8 billion reflecting higher research and development (R&D) costs and the impact of higher deliveries of the 787 Dreamliner aircraft, which carries margins in the low single digits. Sales at Commercial Airplanes increased 10 percent to $17.7 billion on the delivery of a record 199 planes versus 186 a year ago. Segment margin slid 120 basis points to 10 percent and year-to-date are 9.2 percent.

Muilenburg said that mid-teen operating margins in the Commercial Airplanes segment remain “aspirational” and margin growth over the long-term remains a priority.

With strong results so far this year and confidence in its operating performance going forward, Boeing increased its outlook for earnings and sales for the remainder of 2015.

Guidance for earnings was raised a nickel to between $7.65 and $7.85 EPS and by 25 cents for core EPS to between $7.95 and $8.15 as the company raised the outlook for operating margin in the defense segment by a half-percent to around 10 percent. The company also projects slightly lower spending on R&D than prior guidance.

Sales guidance was raised by $500 million to between $95 billion and $97 billion on higher than expected commercial plane deliveries. Boeing expects to deliver between 755 and 760 commercial aircraft this year, five more than previously forecast.

Muilenburg said the commercial airplane market continues to be “growing” and “healthy” with independent assessments continuing to show 6 percent annual growth in passenger traffic for the foreseeable future. He also said that there are some signs of recovery in the cargo market.

Free cash flow in the quarter was $2.3 billion and backlog stood at $485 billion, down $4 billion since the end of June. Defense segment backlog stood at $59 billion, 40 percent of it from international orders.