By Christopher Hinton, MarketWatch
NEW YORK (MarketWatch) -- Boeing Co. is expected to post weaker first-quarter results from a year ago, as it winds down the production rate of its commercial jets to match the dwindling demand among aircraft operators.
The Chicago-based manufacturer is set to report quarterly results on Wednesday, and analysts polled by FactSet Research expect earnings of 99 cents a share, on average. In the same quarter last year, the company said it earned $1.62 a share.
Boeing /zigman2/quotes/208579720/composite BA -3.58% reduced its commercial production rate for its wide-body jets earlier this month, taking the popular 777 down to five a month from seven beginning in June next year, and delay plans to increase production for its 747-8 and 767 planes. See full story.
The moves are expected to take a bite of 38 cents a share out of the first quarter's profit, the company said.
Some analysts suspect a cut in production rates for the narrow-body 737, which has a shorter build time, will be announced later this year.
"The production-rate adjustment at Boeing is the latest to reflect the challenging market, and it is unlikely that it will be the last," said Brian Studioso, an analyst with CreditSights. "Low consumer confidence, rising unemployment and cutbacks in spending continue to weigh on demand for air travel."
With more deferrals generally come falling prices as customers take advantage of the lower demand.
"The adjustments do not represent major changes from our prior forecast, which had deliveries of current production airplanes roughly 20% below planned 2010 levels," said Bernstein Research analyst Douglas Harned, in a recent note to investors. "Boeing may take additional orders at lower prices to fill slots, as happened in prior cycles."
/zigman2/quotes/210598065/realtime DJIA 26,763.13, -525.05, -1.92%
Shares of Boeing are down sharply form a year ago, off more than 55% since May and down 37% in the last six months. On Thursday they closed up a fraction at $38.39.
Despite the airline industry pulling more seat capacity and parking hundreds of aircraft, Harned said the global capacity rate is still likely to grow next year, and that will add to delivery pressure.
At the end of March, Boeing had 3,589 orders in its backlog. So far this year, the company has received 28 total new orders for the 737 and 777 jets, and 32 cancellations for the 787.
The 787, troubled by supply-chain issues and two years behind schedule, is now scheduled for its first flight in the second quarter, with first deliveries in the first quarter of 2010.
Boeing has also been getting bruised on the military side. The company is the prime contractor for several high-cost military programs the Pentagon recently said it wants to either delay or cancel. However, analysts note that despite large price tags associated with those programs, revenue would have been spread out among many subcontractors over many years, diluting the impact to Boeing's future earnings.
On April 6, the Pentagon said it wanted to end purchases next year of Boeing's C-17 transport plane and cancel the vehicle side of its Future Combat Systems program. It also wants to terminate Boeing-led programs the CSAR-X combat search and rescue helicopter and the TSAT satellite, and cancel a second prototype model for the airborne laser, midcourse missile-defense program. Read more about the Pentagon budget.
Major suppliers to Boeing are also preparing for falling commercial-aircraft demand, including Rockwell Collins , Spirit Aerosystems /zigman2/quotes/205043289/composite SPR -6.37% , Precision Castparts , and Moog /zigman2/quotes/210100990/composite MOG.A -2.20% /zigman2/quotes/209198540/composite MOG.B -5.37% .