Boeing Bullish on 2019 Despite US-China Tensions
Boeing reported a strong fourth quarter on Wednesday and offered a bullish 2019 outlook as executives expressed measured confidence in the prospects for a US-China trade agreement.
The US aerospace giant, which has been boosted by a multi-year plane building boom amid surging global air travel demand, reported fourth-quarter profits of $3.4 billion, up 3.1 percent from the same period a year ago.
Revenues were $28.3 billion, up 14.4 percent.
Several of the company’s financial figures were company records, including annual revenues topping $100 billion for the first time at $101.1 billion.
Shares rallied on the report and 2019 forecast, which anticipates much higher than expected 2019 profits as the company ramps up commercial aircraft deliveries.
“Across the enterprise, our team delivered strong core operating performance and customer focus, driving record revenues, earnings and cash flow and further extending our global aerospace industry leadership in 2018,” said Boeing Chief Executive Dennis Muilenburg.
On a conference call with analysts and reporters, Muilenburg described global demand for air travel as still “very strong,” though he said the company expected “some moderation going forward” regarding new orders.
Boeing remains bullish on China, citing air travel growth in the country that is outpacing both global trends and overall Chinese economic growth. Muilenburg cited statistics that China was expected to account for nearly one-fifth of new planes built over the next 20 years.
In December, Boeing opened a new “completion and delivery center” in Zhoushan, China where 737 planes are flown into the country from Seattle and interior work is completed.
China accounted for more than 20 percent of Boeing’s commercial aircraft revenues through the first nine months of 2018.
Muilenburg said the cadence of orders depended on China’s next five-year plan, which is connected to the outcome of trade talks between Beijing and Washington.
“Given the five-year planning cycle, we’re having ongoing discussions with our customers in China, the Chinese government and the US government,” he said.
“We expect China as a long-term growth market for us but exactly how those efforts play out over the next quarter or two is still an open question as we proceed with trade discussions.”
– Sees ‘progress’ on trade –
Another round of talks between the two governments started in Washington on Wednesday, with the Chinese team led by Vice Premier Liu He and the American side by US Trade Representative Robert Lighthizer.
Muilenburg expressed optimism on the overall state of negotiations.
“Having been intimately involved in the discussions and engagement with the governments both in the US and China, we see progress on that front,” he said.
“We see convergence, and we also see there is clearly a mutual benefit to having a healthy aerospace industry for both the US and China.”
Some major companies, such as Apple, FedEx and Caterpillar, have in recent weeks cited sluggishness in China as a headwind for their results.
But other companies, including General Motors and Nike, have described solid demand despite slowing growth in China in the wake of a protracted US-China trade war.
Boeing projected 2019 profits of $19.90 to $20.10 per share, well above the $18.31 seen by analysts.
It expects to deliver between 895 and 905 commercial planes, up from 806 in 2018.
Boeing’s most popular aircraft have moved past the initial production phases when costs are higher into a stage of increased plane delivery that is more profitable.
Boeing has been ramping up production of its single-aisle 737 plane, which accounted for more than half of the company’s commercial deliveries in 2018.
Production on the plane is now at 52 per month and will rise to 57 later in 2019, executives said.