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Stormy skies ahead - Boeing Shares Plunge On Weak 2016 Forecast


Boeing has signalled a slowdown in the booming airliner market, with the aerospace giant forecasting a decline in sales in the coming year, news which sent the shares plunging. The Seattle-based business beat analyst expectations by posting annual revenue of $96.1bn for 2015, a rise of 6pc, helped by record deliveries of airliners. The company handed over a record 762 new jets to airlines during the year, but warned that this performance was unlikely to be repeated in 2016. Next year's sales were likely to come in between $93bn and $95bn, Boeing said - below analyst predictions of about $97bn. Deliveries were forecast to be between 740 and 745 jets.

Problems with the company's contract to build new air-to-air refuelling tankers for the US military and the recent decision to slow down production of the 747 jumbo jet hit profits, which dropped 5pc to $5.2bn during the year. Operating margin declined half a percentage point to 7.7pc. The profit fall and gloomy outlook caused Boeing's shares to dive almost 10pc, wiping $8bn off the company's market value. Worries about the company's performance were heightened by reports in the Seattle Times that Boeing could also announce it is to slow down production of its 777 jet. The report claims that boeing does not have enough buyers for all the production slots in the current version of the widebody airliner, which is due to be superceded by a modern and more efficient version, the 777X. Slowing down the rate at which the jets come of the Seattle production line would involve another write-off. Robert Stallard, analyst, RBC Capital Markets, said: "We think it is not a matter of if but when on this 777 rate cut, and in some ways it would be good for Boeing to get this out of the way to try and remove the overhang. "New CEO Dennis Muilenburg has an opportunity here to stamp his mark, and turn a page on the languid approach of [predecessor] McNerney. However, given Boeing's traditional aversion to addressing negative issues, and talking about financial projections beyond December 31st , nothing is guaranteed."

Despite the warning on sales, Boeing executives pointed to the company's $489bn backlog of work as sign of its long-term strength. As an indication of its confidence, Boeing announced it would step up its share buy-back scheme to $14bn over the next two to three years, and raised its quarterly dividend by 20pc. The manufacturer's commercial aerospace division remained its powerhouse during the year, accounting for about two-thirds, or $66bn, of sales. Boeing's defence, space and support units made up the rest of its sales, down 2pc on the previous year.

Dennis Muilenberg, chief executive, said: "Building on our foundation of solid core operating performance and customer focus, Boeing extended its leadership of the aerospace industry in 2015 with record deliveries and revenues in commercial airplanes, and solid sales and healthy margins in our defence and space business. "We are well positioned for profitable growth and higher cash flow as we move into our second century in business."

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