Boeing surged after reporting a record cash gush for 2018 and cracking the $100 billion sales barrier for the first time in its 102-year history—and the U.S. planemaker says the best is yet to come.
Sales, earnings and cash are all poised to rise this year, building on fourth-quarter earnings that beat estimates, the company said in a statement Wednesday. The lone blemish: Free cash flow of $2.45 billion in the last three months of 2018 missed the $2.52 billion average of analyst estimates compiled by Bloomberg.
The upbeat forecast shows that Boeing still sees room for improvement as it works to overcome factory stumbles in its jetliner business and speed output of its cash-cow 737 planes. Boeing and Airbus, its European rival, are riding high on a historic sales boom rooted in low interest rates and a growing middle class, particularly in Asia.
“There’s a very strong guide and no hint that there’s anything that could derail this,” said Ken Herbert, an analyst with Canaccord Genuity.
The shares jumped 6.2% to $387.40 ahead of regular trading in New York. Through Tuesday’s close, Boeing had risen 13% this year, the third-best performance on the Dow Jones Industrial Average.
Exceeding Estimates
Revenue will climb to a range of $109.5 billion to $111.5 billion this year, up from $101.1 billion in 2018, the company predicted. Operating cash flow will be as much as $17.5 billion, about $2 billion more than last year.
Adjusted earnings will be $19.90 to $20.10 a share, Boeing said. That compared with the $18.44 average of analyst estimates compiled by Bloomberg.
All of Boeing’s main businesses posted double-digit sales increases in the fourth quarter, and the company expects the momentum to continue into 2019 as it emphasizes cross-selling initiatives. While the shares have gyrated in response to trade tensions between the U.S. and China, Boeing is still seen as a safe haven for its $490 billion backlog of unfilled orders.
The Chicago-based manufacturer sold more commercial jets than it made in 2018, tallying 893 orders with a value of $143.7 billion. Repeating that performance this year will be tougher as the company targets delivering a record 895 to 905 commercial aircraft while navigating a global economy fraught with geopolitical risk.
Downturn ‘Risk’
Still, some analysts are monitoring a recent spate of airline bankruptcies and sputtering economic growth in China for inklings of the next slump.
“The big risk is that we go into a downturn,” George Ferguson, an analyst with Bloomberg Intelligence, said in an interview prior to the earnings release.
Boeing has also been contending with parts shortages and costly out-of-sequence work in its jetliner factories. The company delivered 806 aircraft last year, falling shy of its target for 810 to 815, despite working deep into the year-end holidays to overcome engines and other shortages.
This year, Boeing (BA) is looking to increase output of its 737 jetliners by almost 10% while boosting production of the 787 Dreamliner. Deferred production costs for the Dreamliner program fell $584 million to $23 billion in the fourth quarter, reflecting improved per-plane profit as Boeing improved efficiency with which its carbon-fiber jets are built.
Max Production
Bringing suppliers along for the ride to stepped-up production will be challenging, particularly as engine makers cope with parts shortages of their own. But there were signs of progress in the late push to get back on schedule. Boeing delivered 51 of its upgraded 737 Max jetliners in December and 111 of the jets in the fourth quarter.
That’s crucial to “shore up confidence that the Max production system is making progress” ahead of 2019, when the redesigned aircraft family will account for nearly all of the 737 models that the planemaker builds, said Seth Seifman, an analyst at J.P. Morgan Chase.
