CHICAGO — The Boeing Co.’s stock price fell in trading Wednesday after the company posting an increase in expenses for the 787 Dreamliner, the plane known for its carbon-composite fuselage, tardy commercial debut and persistent drain on cash.
The jet’s deferred production cost rose 3 percent to $26.94 billion at the end of the first quarter from the prior three months, Boeing said. The expense is an accounting measure that is supposed to drop as a projected gain in efficiency reduces assembly costs on the 787, which entered service in 2011 more than three years late.
Boeing delivered 184 airliners in the quarter, up from 161 in the same period last year, with two-thirds of them for the venerable 737 jet, a workhorse on short and mid-range routes around the world.
Meanwhile, orders minus cancellations rose by a net of 110 in the quarter, and Boeing now has 5,700 orders on its books. About half are for an upcoming version of the 737. The backlog is valued at $495 billion.
“They can only drive so much of the earnings through buying back shares and increasing narrow-body rates,” said George Ferguson, senior analyst for air transport with Bloomberg Intelligence. “They’ve got to get the 787 to work better to boost earnings and get rid of this cash problem.”
Boeing’s continued struggles with the Dreamliner dampened investor optimism over a quarter in which the Chicago-based planemaker beat analysts’ profit estimates to extend a five-year streak of matching or topping those projections. After an initial rally, the price of shares closed down 1.4 percent at $151.19.
Profit excluding some items increased to $1.97 a share from $1.76 a year earlier, Boeing said. That exceeded the $1.80 average estimate of 17 analysts surveyed by Bloomberg. Sales climbed 8 percent to $22.1 billion, short of the $22.5 billion average projection.
Operating cash flow tumbled 92 percent to $88 million, reflecting “timing of receipts and expenditures,” Boeing said. Free cash flow was negative $486 million, dropping from $615 million.
The company reaffirmed its forecast for full-year earnings in the range of $8.20 to $8.40 per share and revenue between $94.5 billion and $96.5 billion.
Boeing has invested about $50 billion in the 787, and the plane’s net present value is probably approaching negative $20 per share, according to estimates from Carter Copeland, a New York-based aerospace analyst with Barclays.
While the Dreamliner faces nagging issues, including seat delays, Boeing officials see production costs peaking later this year and seem increasingly confident that the jet is moving past early production snarls, Copeland said in an April 13 report.
“Things are beginning to change on the program and, at least directionally, we have increased confidence that more substantial improvements are on the horizon,” he said.
Progress on 787 costs is critical as Boeing works to convert a record order backlog into cash, Douglas Harned, a New York-based analyst with Sanford C. Bernstein &Co., said in an April 17 report.
Boeing said in January it expected to generate more than $6.2 billion in free cash flow in 2015. Harned called that forecast “conservative guidance,” citing Boeing’s history of beating those initial figures “by at least $2 billion in each of the last six years.” He and Copeland both rate Boeing as the equivalent of buy.
The company repurchased 17 million shares for $2.5 billion last quarter, leaving $9.5 billion remaining under the current buyback authorization, which Boeing expects to complete in two to three years.
Boeing uses a profit measure that it dubs core earnings per share, a figure the company says gives a clearer picture by adjusting for market fluctuations in pension cost. Net income of $1.87 a share rose 46 percent from a year earlier, when earnings included a 29 cent charge related to retirement-plan changes.
A surge in Dreamliner deliveries contributed to a decline in the commercial division’s operating margin, Ferguson said. That gauge declined to 10.5 percent from 11.8 percent.
While defense revenue fell 12 percent to $6.71 billion, the unit’s operating margin improved to 11.1 percent from 10.2 percent.
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