- The Washington Times - Wednesday, January 25, 2012

Aerospace giant Boeing announced Wednesday it had posted its best year ever in 2011, but it faces a tough time repeating the performance in 2012.

The Chicago-based plane-maker announced a 20 percent increase in earnings and record revenue gains in 2011. Earnings per share improved to $5.34, up from $4.45 the previous year. Revenue from deliveries hit a record high of $68.7 billion, up from $64.3 billion in 2010 and $68.3 billion in 2009. The company also increased its backlog of future sales.

But Boeing now faces likely cuts in U.S. defense spending, rising pension costs and a higher tax rate. The outlook has the company projecting lower earnings this year from $4.05 to $4.25 per share.

Boeing CEO and President W. James McNerney Jr. expressed confidence the company can weather the storm. After investors showed initial signs of concern, the stock ticked back up 46 cents, or less than 1 percent, to close at $75.82.

“We enter 2012 with renewed momentum and proven business and product strategies,” Mr. McNerney said Wednesday. “With a record backlog and intense focus on productivity, we are well positioned to deliver growth and increased competitiveness, even as we face constrained U.S. defense spending and pension headwinds.”

This comes as Boeing’s European rival, Airbus, again outpaced the company in global sales in 2011. Airbus last week announced it booked 1,419 new orders and made 534 deliveries, compared with Boeing’s 805 new orders and 477 deliveries.

Boeing expects to continue production increases in 2012 that will boost revenue to the range of $78 billion to $80 billion, which would far surpass last year’s record high.

The first 787 Dreamliner hit the market in 2011, but delays have slowed production. This year, Boeing hopes to ramp up production for that model, as well as other twin-aisle planes such as the 777 and 747-8.

“Clearly, wide bodies tend to bring you better revenue,” Boeing spokesman Chaz Bickers said.

Richard Aboulafia, vice president of analysis at the Virginia-based Teal Group, expressed doubts that Boeing will be able to correct all of its problems with the 787 Dreamliner and continue its momentum in the new year.

“They had a very good year,” he said, “but they’re still figuring out how to build the 787. I think that’s what’s dampening their outlook.”

Sales for the single-aisle 737 MAX, which hit the market in August, are also expected to take off. So far, Boeing has more than 1,000 commitments and 150 confirmed orders for this model. It also announced a large order of 100 of these planes Wednesday from Norwegian Air.

But the company expects this increased production to be outweighed by falling U.S. defense spending, rising pension costs and a higher tax rate.

Pension costs will increase $934 million from last year, equal to a hit of 83 cents per share.

The company’s tax rate is expected to increase to 35 percent in 2012 from 33 percent last year, which will cost the company an additional $92 million, or 12 cents per share. Boeing also received a favorable tax settlement from the Internal Revenue Service that added 53 cents to last year’s earnings.

Nevertheless, analysts say the company’s long-term future looks bright. Orders jumped to $103 billion from $69 billion the previous year. That pushed the company’s backlog to a record $356 billion.

“It’s a strong performance for the year,” Mr. Bickers said.

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