BOEING But even as Boeing posted strong fourth-quarter results and offered a robust 2015 outlook, its report raised questions: When will Boeing wring profits from its flagship 787 Dreamliner? And when will it return cash to shareholders?
Airlines have lined up to buy new airplanes that are loaded with technology, burn less fuel and allow them to link more cities with direct flights. Even though low fuel prices have undercut some of the logic for buying new planes, airlines are enjoying a windfall from cheaper fuel.
"Overall we see low fuel prices and positive traffic trends as beneficial to our industry and growth prospects," Boeing Chief Executive Officer Jim McNerney said on a conference call with analysts and reporters.
In addition, airlines based outside the United States are loath to defer or cancel orders for new jets, despite the stronger dollar, fearing competitors will jump ahead in line to get new planes. Boeing has an eight-year backlog of unfilled orders at the current production rate.
Boeing booked a record 1,432 net orders for jetliners last year, reflecting that persistent demand. Boeing also is largely insulated from the powerful surge in the U.S. currency that has hit other industrial companies. That's because airplanes and the parts to build them are priced in dollars.
The company's core profit rose 23 percent in the quarter and it forecast strong cash flow in 2015.
Still, some clouds loom. A key measure of 787 losses, known as the deferred production cost balance, rose, suggesting to some analysts the jetliner introduced in 2011 may take longer than expected to begin to generate cash.
But Boeing still expects the 787 to begin generating cash this year, and that deferred costs would level off and start to decline in 2016, in line with its forecasts.
"Those things have not changed," Chief Financial Officer Greg Smith said on the call.
The deferred costs will rise in the next two to three quarters, before starting to decline, he added. He said the costs are anticipated in its outlook for generating cash. "At the end of day, that's what matters."
Analysts pressed for details on its timing for returning cash to shareholders. Boeing's board of directors increased the authorization for share buybacks to $12 billion last month, and increased the dividend by 25 percent.
Boeing stock "was a big laggard last year," said Carter Copeland, an analyst at Barclays. "People want to believe in it, but until they saw this cash flow guide" that was tough. He was referring to its strong forecast of $6.2 billion (4 billion pounds) in free cash flow in 2015.
As for when it will return that cash, Boeing was not specific.
"You've seen what we did last year, you see the authorization we have in place, we plan to do that," Smith said.
Boeing shares rose 5.6 percent to $139.87, easing from a session high of $141.89.
(Editing by Jeffrey Benkoe)
By Alwyn Scott
