Boeing Co. on Wednesday gave 2016 guidance that fell well short of Wall Street expectations, though the world’s largest aerospace company posted fourth-quarter profit that easily topped analysts’ views.
Boeing said it expects to post adjusted earnings between $8.15 and $8.35 in 2016, while analysts polled by Thomson Reuters had forecast $9.43 a share in earnings. The company forecast revenue between $93 billion and $95 billion, while analysts had called for $97.2 billion in revenue.
Shares fell 3.8% to $123 a share in premarket trading.
Boeing last week said it would cut production of its venerable jumbo 747-8 jetliner to just six a year starting in September, the latest step in the decline of the iconic jumbo jet. That came as Boeing delivered a record number of jetliners last year as airlines world-wide continued to expand and renew their fleets despite weakening economic growth in some large emerging markets.
For the new year, Boeing expects commercial deliveries to fall to 740 to 745 from 762 last year.
Overall for the quarter ended Dec. 31, Boeing reported a profit of $1.03 billion, or $1.51 a share, down from $1.47 billion, or $2.02 a share, a year earlier. Boeing booked a $569 million charge in the latest quarter related to the production cut.
Per-share core operating earnings, which exclude such items as pension components related to market fluctuations, were $1.60 a share. Revenue fell 3.7% to $23.6 billion.
Analysts had forecast $1.28 a share in adjusted earnings on $23.53 billion in revenue.
Revenue in its commercial airplanes division slipped 4% as deliveries fell 7%.
Boeing Co. fell the most in five months after predicting weaker profit and fewer jetliner deliveries than analysts expected, stoking concerns that airlines’ appetite for new planes is waning amid global economic turmoil.
The company was the worst performer among the 30 members of the Dow Jones Industrial Average even though its fourth-quarter profit exceeded estimates by a wide margin. The stock plunged 9.5 percent to $115.87 at 10:14 a.m. in New York after earlier dropping as much as 10 percent, its steepest intraday decline since August.
Earnings excluding some pension expenses will probably be $8.15 to $8.35 a share this year, the company said Wednesday in a statement. That was more than $1 below than the $9.42 average of 22 analyst estimates compiled by Bloomberg. Boeing’s sales forecast of between $93 billion and $95 billion fell short of analysts’ projections of $97.3 billion.
Aircraft deliveries this year will fall from a record 762 in 2015, Boeing said, fueling concerns that revenue growth may be hampered by a saturated market and a sluggish global economy. Planemakers typically receive the bulk of payment for their products when they are delivered to customers.
“We’ve seen this telegraphed in the marketplace, we know there is softness in widebody sales” of models such as the 777, said George Ferguson, senior air transport analyst with Bloomberg Intelligence. “Boeing may be smart here and decide it’s not selling airplanes on the cheap. But that’s not going to make investors feel any better today, because that hurts earnings.”
Boeing’s traditionally conservative annual forecast will be in the spotlight as Chief Executive Dennis Muilenburg addresses analysts later this morning.
Aircraft deliveries should taper to 740 and 745 jetliners this year as Boeing cuts production of its iconic 747 jumbo jet and begins manufacturing a new version of the 737, its all-time sales leader. Executives have said they are studying a similar production cut for the best-selling 777 jetliner amid a transition to an upgraded model.
Boeing said it was reaffirming already announced manufacturing increases for its aircraft, without elaborating.
While the weaker earnings shouldn’t “negatively impact Boeing’s existing plans to return cash to shareholders, it could create doubt as to the sustainability of these plans, especially with the probable 777 rate cut/777X ramp still ahead,” Robert Stallard, an aerospace analyst with RBC Capital Markets, said in a report Wednesday. “And this doesn’t include any impact from an aerospace downturn if this should occur at some point before the end of this decade.”
Boeing expects operating cash flow to rise this year to about $10 billion, from $9.36 billion in 2015, as it works to drive down costs and build aircraft more efficiently. Its board also approved increasing the share repurchase authorization to $14 billion, to be made over the next two to three years. Fourth-quarter profit of $1.60 a share topped the $1.27 anticipated by analysts.
Deferred production costs for the Dreamliner rose to $28.5 billion during the fourth quarter from $28.3 billion in the previous quarter, Boeing said on its website. Boeing has said the figure, which measures funds already poured into inventory and labor against increases in production efficiency, will plateau this year as it speeds 787 output to 12 planes a month.
Investors have been searching for signs that costs have peaked for the Dreamliner, which has drained cash that Boeing should be reaping from a near-record order backlog. The jetliner is the first built of spun carbon-fiber composites rather than aluminum and entered commercial service in 2011, more than three years late.
The unexpected drop in jet deliveries “doesn’t point well to the long term,” Ken Herbert, aerospace analyst with Canaccord Genuity, said by phone. “You could think of 2016 as a plateau or a settling before further acceleration, but that certainly brings into question that acceleration into ’17, ’18, ’19.”