By Bill Rigby
NEW YORK (Reuters) - BOEING (BA.NY)Co's
The planemaker, which is also the No. 2 U.S. defense contractor, effectively suspended its financial outlook until after the end of the strike by its largest union, now in its seventh week.
Boeing shares closed down 7.5 percent on the New York Stock Exchange, as all the major indexes fell. The shares are down 51 percent this year.
Almost 27,000 members of the International Association of Machinists and Aerospace Workers walked out of Boeing's plants on September 6 after rejecting the company's three-year contract offer.
The two sides are set to resume talks with the help of a federal mediator on Thursday, but have so far struggled to find common ground on the key issue of outsourcing.
Boeing is to update its financial outlook when the strike is settled. Each day of the strike would add a day to existing production schedules, said Chief Executive Jim McNerney, plus an unquantified period for getting operations back up to pre-strike production rates. Analysts are anticipating significant cuts from the company's current guidance.
READY FOR LONG STRIKE
The company said it had a strong balance sheet to deal with a long strike and the effects of the global financial crisis. But its cash and marketable securities fell 29 percent in the quarter to $4.2 billion, partly due to the strike, but also because of rising 787 inventories and some acquisition costs.
Boeing warned that it might need to provide financing to some of its customers for planes delivered in 2009, a sign that it is concerned about the financial health of airlines.
It expects U.S. defense spending growth, the key driver of its military business, to moderate, but said it would focus on keeping its own programs on track.
The new 787 Dreamliner was progressing, Boeing said, but it did not update its targets for the first flight, which was supposed to be at the end of this year, or delivery, which was set for the third quarter of next year.
Industry watchers are expecting another delay to the plane, which is already at least 16 months behind schedule.
PROFIT, REVENUE FALL
Chicago-based Boeing, which outsold EADS
Excluding one-time tax effects, earnings were $1.02 per share, 2 cents higher than Wall Street's lowered average forecast, according to Reuters Estimates.
Boeing said the strike cut about 35 cents per share from profit, while delays in getting galleys installed on some widebody planes cut a further 25 cents.
Revenue fell 7 percent to $15.3 billion, largely because of the effect of the strike on the commercial plane business. The defense unit posted higher revenue and profit.
Chief Financial Officer James Bell said Boeing's pension assets were down about 20 percent at mid-October, following recent plunges in global markets. He said that would likely increase the company's pension costs next year by $100 million and could cut the company's equity by "several billion dollars" if it has to pay money into its pension funds.
Boeing's shareholder equity stood at $8.7 billion at the end of September. The company will gauge the position of its pension investments at the end of the year, and establish whether more funding is needed.
Rival Lockheed Martin Corp
Boeing's shares fell $3.49 to $42.91 on the NYSE. They hit a 4-1/2 year low of $39.99 last week, hurt by broad economic concerns, volatile oil prices and worries about the financial strength of airlines.
Boeing's current forecast for full-year earnings -- not counting any strike effects -- is $5.70 to $5.85 per share. Analysts, factoring in the strike, are expecting $5.08 on average.
For next year, Boeing is forecasting $6.80 to $7.00 per share, above analysts' average estimate of $6.73.
(Reporting by Bill Rigby; Editing by Lisa Von Ahn, Brian Moss and John Wallace)
