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Boeing offers weak 2016 outlook; shares tumble
[New York] Boeing shares tumbled on Wednesday after it offered a disappointing forecast for 2016 and said it expects commercial plane deliveries to decline for the first time since 2010.
Shares of the aerospace giant fell 9.1 per cent to US$116.41 in afternoon trade after it projected 2016 commercial aircraft deliveries of between 740 and 745, down from a record 762 in 2015.
Boeing said it expects flat to slightly lower 2016 revenues and core earnings per share of US$8.15 to US$8.35, well below the US$9.43 expected by Wall Street analysts.
Boeing chief executive Dennis Muilenburg said the company's investments in new planes reflect annual global passenger growth of six-seven percent per year.
"Passenger growth continues to outpace GDP," Mr Muilenburg said. "The fact that we are ramping up should convey our confidence." Mr Muilenburg said Boeing should post better numbers after 2016, with commercial deliveries rising again in 2017.
"You'll see revenues growth, delivery growth, cash growth" in 2017 and 2018, he said. "We're very confident in that story." But Wall Street's brutal response suggested the poor 2016 outlook was seen as a sign that the aerospace up-cycle is "looking long in the tooth," as RBC Capital said in a recent report.
Boeing's forecast "is being considered as a signal of weakening demand, which doesn't appear to be the case," Barclays said in a note.
"Make no mistake, the macro backdrop for aircraft sales is incrementally weaker than in recent years, but the Boeing (earnings) shortfall is unconnected in our view."
The lowered 2016 outlook on deliveries threatens to erode Boeing's advantage over rival Airbus, which said on January 12 that it expects 2016 deliveries to rise to 650 aircraft from 635 in 2015.
Airbus reported a substantial edge in net orders last year, 1,036 for the European maker versus 768 for Boeing.
The outlook comes on the heels of a January 21 announcement that Boeing was cutting production of the 747-8 freighter in half, to one plane every two months, due to falling demand in the air cargo market.
Boeing executives also pointed to other model adjustments for the drop in 2016 deliveries.
Production of Boeing's best-selling 737 will be in "transition" in 2016 as it introduces the new version, the 737 MAX, said chief financial officer Greg Smith.
Deliveries of the single-aisle aircraft were down to 120 in the fourth quarter from 126 in the third quarter.
But Boeing said monthly production of the sought-after 737s will rise from 42 in 2016 to 47 in 2017 and 57 in 2019.
Boeing is also transitioning its long-range 777 to the new 777X and foresees production of seven per month starting in 2017.
That rate is below the level the last two years. In the fourth quarter, output fell to 21 from 27 in the previous quarter.
Boeing said fourth-quarter net income was US$1.0 billion, down 30 per cent from the year-ago period. Sales fell 3.7 per cent to US$23.6 billion.
Fourth-quarter earnings per share of US$1.60, nevertheless, were well above market estimates of US$1.27.
For all of 2015, the Chicago-based company had net income of US$5.2 billion, down five percent from a year ago.
Annual earnings per share also handily beat expectations by 32 cents, at US$7.72.
The company's 2015 revenues also came in better than expected, up 5.9 per cent to US$96.1 billion.