Boeing Earnings Tumble

Closing the 717 program and cancellation of an Air Force pact sink the bottom line.
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Updated from 7:41 a.m. EST

Boeing's

(BA) - Get Report

fourth-quarter earnings slid 85% from a year ago on charges related to the company's cancellation of its 717 commercial jet program and the scuttling of a controversial Air Force tanker contract.

Still, the company beat analyst expectations, and its stock gained Wednesday.

The aerospace giant earned $186 million, or 23 cents a share, in the quarter, compared with $1.13 billion, or $1.40 a share, last year. Revenue rose 1.3% from a year ago to $13.31 billion.

Boeing's most recent quarter had a charge of 44 cents a share for the 717 program as well as the Air Force's 767 tanker program. It also included a gain of 12 cents a share reflecting state tax settlements.

Excluding the tax gain, Boeing earned 11 cents a share, better than the 4-cents-a-share analyst consensus from Thomson First Call. Analysts don't appear to have been including the tax gain in their estimates.

Boeing also beat the Thomson First Call revenue estimate of $12.78 billion, and issued guidance that is consistent with estimates. Boeing sees 2005 earnings of $2.40 to $2.60 a share on revenue of $58 billion. Analysts had been forecasting earnings of $2.56 a share. For 2006, the company sees earnings of $3 to $3.20 a share, compared with the estimate of $3.06 a share.

Investors bid up Boeing shares 85 cents, or 1.7%, to $51.89. The 717 and tanker charges were no surprise, as the company announced them last month.

"Our cash flow remains very strong," Boeing said. "Significant progress on important new programs like the 787 (formerly the 7E7) and the Multi-mission Maritime Aircraft, as well as expansion of key contracts like Future Combat Systems, position us well for future growth. As we enter 2005 our focus remains on business execution, demonstrating our commitment to integrity and growing the business."

The company said revenue in its integrated defense systems unit grew 5% to $7.6 billion during the quarter, driven by growth in its Network Systems and Support Systems segments. For all of 2004, the unit posted double-digit revenue growth and booked more than $30 billion of new orders.

Boeing's contract to lease the Air Force 767 tankers was cancelled, and the service's tanker program is under Pentagon review. During a conference call, Harry Stonecipher, Boeing's chief executive, said the company was "confident" it would "make progress" on the program in 2005.

Fourth-quarter revenue and airplane deliveries fell at Boeing's commercial airplanes unit, which faces harsh competition from rival

Airbus

, a joint venture of European Aeronautic Defence & Space and BAE Systems. Revenue was $5.40 billion, down 8.0% from $5.84 billion in the fourth quarter of 2003. The unit delivered 67 planes, vs. 71 a year earlier.

The commercial airplanes unit also recorded a fourth-quarter loss from operations of $149 million, vs. a $471 million profit a year before. The latest quarter included charges of $280 million for the 717 program shutdown and $195 million for the unit's portion of the tanker writedown.

Boeing left its commercial airplane delivery forecast for 2005 unchanged at approximately 320 airplanes. In 2006, the company expects to deliver between 375 and 385 airplanes.

Boeing said it ended the year with $6.1 billion in cash and marketable securities, up from $4.6 billion at the end of 2003.