Boeing Co. on Wednesday investors prepared for a rough 2016, forecasting lower profits than expected and fewer aircraft deliveries largely due to production changes necessary to increase production later in the decade, the news He sent its shares down sharply.
Manufacturer of the world's largest aircraft said it still sees a strong market for new aircraft despite the slowdown in global growth and low oil prices.
Boeing said it expects passenger traffic to keep the increase and announced plans to enroll Boeing 737 output to 57 per month in 2019. That would be the highest level for single-aisle aircraft such as Boeing struggles to slow progress of his rival Airbus SA. It is increasing production Boeing 787 Dreamliner series and Boeing 767 as well.
Investors focused on short-term pain, and Boeing shares to their lowest level since August 2011. sent Boeing closed 8.9 percent to $ 116.58 on the Stock Exchange in New York, the biggest decliner in the Dow Jones Industrial Average.
Production to Cut
The cut of one of the most popular aircraft Boeing 737 production surprised analysts who expected Boeing to keep rates rather than risk losing market share of Airbus.
Boeing last week announced a production cut at Boeing 747-8 series, now primarily a cargo plane, which said it would keep the line going to the retirement of older aircraft collected in 2019.
Boeing also said on Wednesday it would cut output of wide-body Boeing 777 series in 2017, as it changes the updated 777X model, due out in 2020.
The cuts are probably no coincidence between the negative global sentiment, said Richard Aboulafia, an analyst with Teal Group. "In the here and now, there is reason for concern," he said.
He and others saw reductions as a sign of the difficulty Boeing has been selling the last few current models 737 and 777. They observed heavy discount at a recent sale to 737 of United Airlines.
737 Cut Out "tells me narrow-body demand has softened a bit," said a fund manager.
Boeing said it expects global passenger traffic increase of 6-7 percent annually over the long term, above the historical average of 5 percent. This would support increased production in 2017 and beyond. Traffic rose 15 percent in China in the fourth quarter and that the economy slowed giant CEO Dennis Muilenburg said in a conference call.
"Stepping up to 57 per month in 2019, continues a trend of confidence we see in the narrowbody market in particular," said Muilenburg. "This is telling us that continued to increase production to keep supply and demand in balance is what to do."
By 2016, the centenary of Boeing, the company expects to deliver 740-745 aircraft, compared to a record 762 in 2015. "It's not as if they were wildly over-produce," said Charlie Smith, chief investment officer at Fort Pitt Capital. "The backlog is 5,800 aircraft."
Its forecast for 2016 core earnings of $ 8.15 and $ 8.35 per share was well below the average analyst estimate of $ 9.43.
"This decline was certainly a disappointment," said Ken Herbert, an analyst at Canaccord Genuity. Boeing reported weak earnings for the fourth quarter, mainly due to a charge of 84 cents per share announced last week to curb the production of jumbo jet aircraft, Boeing 747-8.