Boeing Maintains Its Earnings Altitude


Stocks opened lower this morning, with the S&P 500 and the narrower, price-weighted Dow Jones Industrial Average down about 0.1% each as of 10:08 a.m. EST.

This morning Dow component Boeing released its fourth-quarter earnings, with revenue in line with the consensus forecast ($22.3 billion achieved against a forecast of $22.36 billion) and earnings better than expected
($1.28 per share versus a forecast of $1.19).

Earlier this month, aviation regulators worldwide grounded the aircraft manufacturer's flagship 787 Dreamliner following several serious incidents involving some of the jet's lithium-ion batteries. Boeing's press release alludes to this development, dedicating barely more than a paragraph to it. The company concludes tersely: "Current 2013 guidance assumes no significant financial impact from the FAA directive [grounding the 787]."

No one need doubt the good faith of Boeing executives when they make that statement, but investors will recall that it was almost two years ago to the day, on Jan. 26, 2011, that the company conceded that the costs associated with a seventh delay to the 787 program, including penalty payments to customers for failing to meet delivery dates, would have a significant impact on the year's profits. The previous October, Boeing's chief financial officer had told investors at Morgan Stanley's Global Industrials Conference that the then-latest delay would have little material impact on 2011 results.

Boeing's current view is its best forecast based on the information currently available. However, it's worth noting that it is subject to considerable uncertainty: The company may be forced to pay damages to the airlines that have had to cancel all Dreamliner flights, and the duration of the grounding and its knock-on impact on the 787's production and sales pipeline is unknown. In that context, the market's reaction to the current crisis looks pretty sanguine: The shares are off little more than 2% year to date (although the market has rallied more than 5% over the same period). Oftentimes, this sort of crisis can produce wonderful values for patient, opportunistic investors. This doesn't look to be one of those times -- yet.

For Boeing, which is a major player in a multitrillion-dollar market, the opportunity is massive. However, the company's execution problems and emerging competitors have investors wondering whether Boeing will live up to its shareholder responsibilities. In this premium research report, two of The Fool's best industrial-sector minds have collaborated to provide investors with the must-know info on Boeing. They'll be updating the report as key news hits, so be sure to claim a copy today by clicking here now.

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Originally published