Boeing Shares Drop As Cuts Seen Hitting Earnings

Boeing shares sank more than 6 percent Monday as analysts said cuts in production would hurt the plane maker's earnings this year.

After the markets closed on Thursday, Boeing said cuts in output of wide body planes and lower-than-expected plane prices would reduce first-quarter earnings by about 38 cents a share. Wall Street had been expecting profit of USD$1.19 a share.

Many analysts pared their share-price targets and earnings estimates for Boeing on Monday.

"We think that this is just the first of the cuts that Boeing will have to make to its aircraft production rates as it moves through this down cycle," Macquarie Research analyst Robert Stallard said in a note.

"Until there is a recovery in airline demand, profits, financing and confidence," Stallard added, "we expect to see further delivery deferrals and probably lower production into 2011."

Boeing said last week that output of its 777 wide-body twin-engine airliner would fall to five planes a month from seven beginning in June 2010. It added that it would postpone modest planned production increases of its 747-8 and 767 wide body model planes.

Boeing said its airline and cargo customers were facing "extremely difficult economic times."

Besides facing the prospect of more plane order deferrals or cancellations from airlines and cargo carriers, Boeing could also suffer because of planned program cuts at the US Defense Department, analysts said.

Last week, Defense Secretary Robert Gates announced proposals that would end production of C-17 military transport aircraft, restructure the Army's Future Combat Systems program and terminate the Air Force Combat Search and Rescue X helicopter, moves that would affect Boeing.

Gates' recommendations must still become part of President Barack Obama's formal budget submission to Congress, and lawmakers will have the last say on spending.