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Boeing Dreamliner turns into rainmaker, sending shares soaring
[CHICAGO] Boeing Co shares reached an all-time high as the 787 Dreamliner emerged from a decade of losses to help the company post rising profit and weather a turbulent market for wide-body jetliners.
The world's largest planemaker is counting on the marquee carbon-fiber jet and higher output of its single-aisle 737, a workhorse with discount airlines, to bolster results this year. Boeing forecast higher cash and earnings on Wednesday, while predicting a sales decline as it makes fewer 777 wide-body aircraft.
Investors, focused on Boeing's potential cash bounty, responded favorably. The stock was the top performer among the 30 members of the Dow Jones Industrial Average as the index climbed past 20,000 for the first time. The shares rose 3.3 per cent to US$165.79 at 10.20 am in New York.
The quarter's results also were a relief compared with last year, when the company caught investors off-guard with a forecast of fewer 737 deliveries. "We think this release is pretty boring - and boring is good," Robert Stallard, an analyst with Vertical Research Partners, said in a report to clients.
Boeing has pledged to return all of its cash flow to investors, repurchasing shares and bolstering its dividend as a near-record order backlog shelters the manufacturer from market shocks. The Chicago-based company is counting on improving Dreamliner profitability, resurgent defense spending and a new family of 737 narrow-body jets to counteract rising trade tensions with China and a glut of older twin-aisle planes.
Boeing's record share price also reflects a stock buyback binge last year, as the company repurchased 7 per cent of its shares, said George Ferguson, an analyst with Bloomberg Intelligence. While the manufacturer generated US$10.5 billion in cash from operations, it spent US$7 billion on stock, US$4.6 billion on research, US$2.8 billion on dividends and US$2.6 billion on property, plants and equipment.
"They can't keep spending this way and not continue to dwindle cash balances," Mr Ferguson said.
Still, revenue will fall to a range of US$90.5 billion to US$92.5 billion this year, Boeing said, as the company slows production of the 777 this month and in the third quarter because of an order shortfall. Analysts had expected annual sales of US$93 billion.