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Boeing Traders Blow Off 747 Delay

Boeing announced another delay in delivery of the 747 freighter, but its shares were trading higher.
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shares were shrugging off a newly announced delay in the 747 freighter Thursday.

In late morning trading on Thursday, Boeing stock was up $1.12 to $67.09. The shares opened the year at $55.72 and have gained about 25% year-to-date. Boeing remains the third best performing stock in the Dow average, behind just


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Boeing said Thursday the first delivery of the 747 cargo aircraft is now expected in mid-2011, a big change from its most recent suggestion that first delivery could move into 2011.

The aircraft maker said it has found a low-frequency vibration in certain flight conditions as well as an underperforming aileron actuator. "While neither issue requires structural changes to the airplane, they have led to disruptions to certification testing, which the program was unable to offset within the prior schedule," the company said. The schedule change is not expected to have a material impact on 2010 financial results.

Boeing has been plagued by delays in delivery of its most important new products, the 747 freighter and the 787, now expected early in 2011. But the company has benefitted from the improving economy, increasing demand for aircraft and its current status as one of the world's two manufacturers of big jets. It recently announced a

production increase

for the 737, the world's most popular aircraft.

Additionally, after the market closed on Wednesday, the Defense Department said the U.S. Air Force has signed an eight-year, $11.9 billion contract with Boeing for upgrades to B-52 bombers. During the day Wednesday, Boeing shares had traded up $1.45 to $65.97.

In a report issued Thursday, RBC Capital Markets analyst Rob Stallard said the 747 delay is no big deal and reiterated an outperform on the stock.

"A delay to the initial delivery date of the 747-8 has been widely predicted, and we think this will not come as a huge surprise," Stallard wrote. "We had assumed that a minor delay would cost Boeing $150m, and so the lack of a charge is somewhat odd. Whilst the financial impact is minimal, we think this latest delay reinforces investor skepticism over Boeing's ability to deliver the goods, with a read across to the 787."

Still, Stallard said he thinks the delay may have a "disguised blessing," in that it may help to dissuade Boeing from launching a 737 with new engines, "which saves R&D for better projects and minimizes risk."

-- Written by Ted Reed in Charlotte, N.C.


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Ted Reed

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