Boeing Q2 profit drops 21 percent on sales decline

Boeing's profits dip 21 percent in second quarter.

Boeing Co. reported decreased earnings on fewer aircraft deliveries, causing its shares to fall. Still, the aviation giant beat Wall Street’s expectations.

Boeing earned $787 million, or $1.06 per diluted share, in the second quarter ended June 30, down 21 percent from $998 million, or $1.41 per diluted share, in the year-earlier period.

Wall Street analysts surveyed by Yahoo Finance had expected the company to earn $1.01 per diluted share.

Sales fell to $15.57 billion, down 9.2 percent from $17.14 billion in the year-earlier period.

Despite its second-quarter turbulence and previous expectation that 2010 would be a notable year, executives of the Chicago-based aircraft and defense manufacturer reaffirmed their 2010 outlook.

“With our commercial markets recovering, and the priorities of our government customers gaining clarity, we remain well positioned for growth in 2011 and beyond,” Jim McNerney, Boeing chairman, president and CEO, said in a statement released Wednesday.

According to Boeing, the company’s total order backlog at quarter-end was $312 billion, a 1 percent decrease, as the backlog for defense, space and security orders declined. At the same time, the backlog for commercial airplane orders rose.

Boeing’s commercial airplanes division reported second-quarter sales of $7.4 billion, down 12 percent from $8.4 billion in the year-earlier period, on 9 percent fewer airplane deliveries than in the year-earlier period, driven by  supplier challenges and fewer planned wide-body deliveries.

The company said flight tests for the 787 Dreamliner continued during the second quarter. Boeing said it expects to deliver the 787, its new mid-size, fuel-efficient aircraft, at the end of this year. Total firm orders for the 787 program at quarter-end were 863 airplanes from 56 customers.

The 747-8 aircraft, which is a longer version of the 747 aircraft and is designed to be more fuel-efficient and less harsh on the environment, also continued flight tests during the second quarter. According to Boeing, a fifth plane was added to the flight test fleet on July 22.

The company reiterated Wednesday that delivery of the first 747-8 aircraft, planned for the fourth quarter, “may move a few weeks as the company completes flight tests and certification requirements.”

Kenneth Herbert, a Wedbush Securities analyst said Wednesday he believes the first deliveries of the 747-8, and likely the 787 as well, will fall into early 2011.

Sales in Boeing’s defense, space and security division also reported decreased sales of $8 billion, down 8 percent from $8.7 billion in the year-earlier period.

“The key for Boeing is to what extent it can maintain defense margins and revenues while the commercial sector recovers,” Herbet said. “Clearly the pressure on defense will continue to increase, as we are seeing, due to federal top-line budget pressure.”

According to analysts surveyed by Yahoo Finance, Wall Street is expecting third quarter earnings per diluted share to be $1.03, compared with a loss of $2.23 per diluted share in the third quarter last year.

For the first half ended June 30, Boeing earned $1.31 billion, or $1.76 per diluted share, down 19 percent from $1.61 billion, or $2.27 per diluted share in the year-earlier period.

Boeing reported net sales for the first half of $30.79 billion, a 9 percent decrease from $33.66 billion in the year-earlier period.

“If Boeing can maintain margins of at least high single digits, it will continue to provide a floor on the business and should provide strong cash flows,” Herbert said, adding that Boeing’s increasing orders, expected free cash flow of more than $5 billion and expected deliveries are indicative of substantial future sales.

The stock closed Wednesday at $67.32, down $1.30, or nearly 2 percent from Tuesday’s close.

Tags: 787 Dreamliner, Boeing Co., earnings, Transportation