April 23, 2014, 2:16 PM ET
Boeing Co. shares were cruising along Wednesday with a 2% gain, leading gainers in the Dow after the jetmaker lifted its 2014 earnings outlook.
The move followed first-quarter results that were way better than Wall Street expected. Earnings rose 14% to $1.76 a share, trouncing the $1.56 analysts expected. The same goes for revenue: $20.5 billion this past quarter vs. an expected $20.2 billion. That’s up 8% from a year ago.
Meanwhile, core operating margins rose to 10.2% from 9.9%.
Backed by a strong start to the year, Boeing raised its full-year outlook to $7.15 to $7.30 a share from $7 to $7.20, the guidance it offered investors in January.
What’s driving the confidence? Tax breaks, airlines, and Vladimir Putin are all doing their part.
Boeing said flat-out that the higher 2014 earnings outlook reflects a tax settlement that will go on its books in the second quarter. The company figures the change will leave it with an effective tax rate of 29% for the full year, a big step down from the 33.9% effective tax rate it paid in the first quarter.
Commercial aircraft production is up, building on steady demand growth in the airline industry. Boeing delivered 161 planes in the quarter and picked up $14 billion of orders for new ones, bringing its order backlog to 5,100 aircraft worth $374 billion, or a whopping 85% of its total $440 billion backlog.
Meanwhile, Boeing’s defense business is acknowledging all those potential flashpoints out there for what it calls a trending threat environment.
First-quarter military sales were hardly robust, however, down 13% from a year ago at $3.46 billion. Operating earnings from military aircraft also fell, down 22% to $332 million, prompting Boeing to cut its 2014 earnings estimates for military aircraft sales to $14.2 billion from $15 billion.
Boeing’s Global Security Services & Support business, on the other hand, saw sales rise 6% to $2.3 billion while operating earnings rose 12% to $278 million. This is also the business Boeing expects will provide the best operating margin for the company this year (10.5%), which is why Boeing is shifting more resources to this group.
It’s also the reason Boeing is mentioning growing global threats. Without identifying any of these threats, it’s pretty clear escalating tensions between Moscow and the West over the future of Ukraine grabbed lots of attention this past month, especially at the Pentagon. And while any rekindling of the Cold War creates plenty of uncertainty in the marketplace, one undeniable legacy of the first Cold War was that it was very good to defense contractors.
– Jim Jelter