Updated from 8:06 a.m. EDT

Shares of

Boeing

(BA) - Get Report

flirted with their highest levels in nearly four years after the company announced better-than-expected earnings and reaffirmed coming-year guidance.

The Chicago-based aerospace giant said it earned $535 million, or 66 cents a share, in the first quarter. That was down 14.1% from $623 million, or 77 cents a share, a year before. The decline came as rising compensation expenses offset improving profits at Boeing's defense and commercial plane units.

In the latest quarter, EPS included a 7-cent charge related to the disposal of investments and the sale of the Electron Dynamic Devices, or EDD, unit. It also included a 14-cent tax gain. Excluding those items, adjusted EPS was 59 cents a share, 4 cents ahead of the Wall Street analyst consensus estimate from Thomson First Call.

Shares rose 62 cents to $59.62, within range of Tuesday's $60 peak, the stock's highest level since June 2001.

Revenue rose to $12.99 billion, up from $12.90 billion a year earlier but short of the $13.28 billion consensus.

"First-quarter results reflect continued strong operational and financial performance across our businesses," said James Bell, the company's CFO and acting CEO. "Integrated Defense Systems delivered outstanding margins as it continued to execute well on its broad portfolio of defense, space and intelligence programs. Commercial Airplanes generated strong operating performance while capturing over 250 new orders and commitments as the commercial airplane market continues to recover."

The company's defense business reported operating profits of $847 million, up 15% from a year before. Growth was driven by surging revenue and earnings in the network systems unit, which is coordinating the Pentagon's Future Combat System.

Boeing's commercial plane business continued to cut costs and improve efficiency. Even though revenue fell 5% from a year before on fewer plane deliveries, the unit's operating profits grew 11% to $389 million.

But rising noncash compensation expenses had a negative impact on results. Boeing said costs from stock-based retirement plans increased $126 million, or 10 cents a share, as the company adopted new accounting rules. Meanwhile, pretax pension expenses of $223 million were up $151 million, or 12 cents a share, reflecting charges from the EDD sale.

In a conference call, Bell said pension expenses will increase again when the company closes the sales of its Rocketdyne rocket unit and a Wichita, Kan., plant. Current financial guidance does not yet reflect those sales, which could close this year, Bell added.

The acting CEO provided little insight into the company's search for a replacement for former CEO Harry Stonecipher, who was forced out after having an affair with another Boeing executive. Bell said the board continued to conduct its search but declined to say when it might make a decision.

The company, which earlier this week notched up big order wins in Canada and India, reaffirmed 2005 and 2006 guidance, calling for 2005 earnings of $2.50 a share on $58 billion in revenue and 2006 earnings of $3.10 a share on revenue of $62.5 billion.

Boeing said it expects airplane deliveries to increase in 2005 and 2006, followed by a further increase in 2007. Commercial Airplanes' delivery forecast for 2005 is unchanged at 320 airplanes. The delivery forecast for 2006 is also unchanged at between 375 and 385 airplanes.