Commercial division drags down Boeing profit

By Renae Merle
Washington Post

Solid results from its defense business helped Boeing beat third-quarter expectations despite a 31 percent profit decline on poor showings from its commercial division. Associated Press

The company said net income fell to $256 million (32 cents a share), from $372 million (46 cents) in the same period last year. The earnings topped analysts' expectations of 25 cents a share, according to Thomson First Call, sending Boeing's shares up $2.46, or 6.8 percent, to $38.50.

Revenue slipped 4 percent, to $12.2 billion, from $12.7 billion. Boeing said it made a $1.2 billion contribution to its employees' pension accounts during the quarter, which weighed on the results.

"All things considered, we had a very good quarter," said Philip Condit, Boeing's chairman. "Revenues were on track, with growth in our defense businesses offsetting the continued commercial market downturn."

Defense business revenue grew 12 percent during the quarter, to $7.3 billion, from $6.5 billion last year. Boeing, the Pentagon's second-largest contractor, was helped in the quarter by the delivery of orders for Joint Direct Attack Munitions, or JDAMs, which turn "dumb" bombs into precision-guided weapons. The defense business also was aided by contracts for explosive detection systems for airports and advanced communications for weapons systems.

"It looks like their defense side bailed them out," said Michael Doran, an analyst at Victory Capital Management, an investment advisory firm that owns 3.4 million Boeing shares.

On the strength of its defense business, Boeing raised its revenue outlook for the year to $50 billion from its previous estimate of $49 billion. But the company still projects a loss for the year of 2 to 12 cents a share, largely because of charges related to the commercial aircraft business.

The company's 2003 forecast assumes that Congress will approve a $21 billion plan for the Air Force to lease 100 Boeing 767 tankers that refuel fighter jets in midair, company officials said. The proposal, which has been criticized as too expensive, is in limbo while the Senate Armed Services Committee pushes an alternative plan that would lower the cost by $4 billion.