A Japan Airlines Boeing 787 aircraft sits on the tarmac at Logan International… (Elise Amendola, Associated…)
Aerospace giant Boeing Co. posted a larger-than-expected 13% jump in second-quarter profit that was driven by higher deliveries of passenger jets.
But in a conference call with analysts, Boeing Chief Executive James McNerney warned that federal money held back under sequestration budget cuts could have consequences in the future on its defense, space and security business unit, which is spread throughout Southern California.
"We've seen some impact of sequestration, but we have not begun to see most of it yet," McNerney said. "We are not out of the woods at all. We're just entering the woods."
Boeing on Wednesday reported a profit of $1.09 billion, or $1.41 a share. Excluding pension obligations, the company earned $1.67 a share. That compares with $967 million, or $1.27, a year earlier.
Revenue rose 9% to $21.8 billion from $20 billion.
Analysts, on average, had estimated earnings of $1.58 a share on revenue of $20.8 billion.
The Chicago company's run of good fiscal fortune comes even as it has wrestled problems with its flagship jet, the 787 Dreamliner. Most recently, a fire broke out July 12 on an empty Ethiopian Airlines 787 parked at London's Heathrow Airport.
"I'm not fond to say we want to go through these issues. We don't want to at all, but our customers have grown to appreciate the game-changing nature of this airplane," McNerney said.
Last week, the Federal Aviation Administration said it was developing regulations to require airlines operating 787s to inspect a device, called an emergency locater transmitter, after it was found to be at fault in the London fire.
"While we are limited in what we can say publicly by the rules of the investigation, we are working closely with the U.K. air accident investigation branch … and other parties to fully understand the incident," McNerney said.
During the quarter ended June 30, the company delivered 16 of its twin-aisle 787s, compared with six last year.
Boeing had not been allowed to deliver any new 787s for nearly four months until April, because of safety concerns involving overheating issues with the plane's lithium-ion battery system.
But the company resumed deliveries during the quarter. Boeing said it was still on track to deliver more than 60 of the planes during 2013, as it originally planned.
Overall commercial aircraft deliveries for the quarter were up 13% to 169. Boeing delivered 116 of its best-selling 737 jets, five more than last year.
The company raised its forecast for full-year earnings of $5.10 to $5.30 a share. That's up from its previous estimate of $5 to $5.20.
Boeing's defense business' revenue stayed flat at $8.2 billion, while operating earnings were up 3.7%.
"We cannot determine how sequestration will impact specific programs and contracts at Boeing," the company disclosed in its earnings filing. "Reductions, cancellations or delays impacting existing contracts or programs could have a material effect on our results of operations, financial position and/or cash flows."
Boeing's shares closed down 84 cents, or less than 1%, at $106.95 after hitting an all-time high of $109.07 earlier Wednesday.