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April 26, 2011, 12:01 a.m. EDT

Boeing may top forecast as travel demand picks up

Analyst: 777 demand may accelerate production rate

By Christopher Hinton, MarketWatch

NEW YORK (MarketWatch) — Airlines flew more often with fewer aircraft in the first quarter, benefiting companies that provide aerospace parts and services and likely giving a boost to Boeing Co.’s results.

“For the majority of aerospace suppliers, first-quarter growth has been stronger than expected,” Gleacher & Co. analyst Peter Arment told MarketWatch.

“While the spike in oil has tempered some expectations, fleet-renewal programs remain a top priority among the global airlines, which is positive for Boeing’s backlog and production plans,” he said. “We expect to hear that theme reiterated by Boeing management.”

/zigman2/quotes/208579720/composite BA 132.18, +6.13, +4.86%
/zigman2/quotes/210598065/realtime DJIA 30,190.70, +699.81, +2.37%

Chicago-based Boeing (NYS:BA)  reports its first-quarter results Wednesday, with analysts surveyed by FactSet Research expecting a profit of 71 cents a share, on average. In the same period a year ago, the company said it earned 70 cents a share.

Of the eight most recent quarters, Boeing has surpassed the Wall Street view six times.

In the past week, aerospace companies Goodrich Corp. , Rockwell Collins Inc.   and BE Aerospace Inc.  raised their full-year forecasts because of robust air-passenger growth.

Boeing is also likely to hike its full-year outlook to reflect a faster ramp-up of its 777 production line.

The company plans to increase its production rate for the Boeing 777 to seven from five by midyear, and to 8.3 by the first quarter of 2013 to produce 100 jets a year. But the company could potentially move to speed up the rate of production more quickly, Goldman Sachs said in a note to clients.

Indeed, Wall Street generally appears to be betting on some kind of catalyst to lift Boeing’s outlook. Although company executives forecast a full-year profit in the range of $3.80 to $4 a share, analysts have it pegged at $4.09 a share on average, according to a FactSet poll.

Shares of Boeing are flat when compared to a year ago at just below $75, though the stock has gained about 3.7% in the past three months. Weighing on the share price are U.S. cuts to major weapon budgets as well as the troubled 787 program, which has seen first deliveries delayed by almost three years. The 787 Dreamliner should arrive at its first customer’s doorstep sometime in the third quarter.

Also delayed numerous times are the 747-8 passenger and freighter jets. The freighter is now scheduled to be delivered midyear, while the passenger plane is slated for the fourth quarter.

Goldman has a buy rating and an $82 price target on Boeing, which is a component of the Dow Jones Industrial Average (DOW:DJIA) .

Supply-chain disruptions

On a related front, the U.S. could halt Boeing’s plan to build a second assembly facility for the 787 in South Carolina because it’s allegedly a retaliation against unionized workers over past strikes called at its Washington state facility.

Such a retaliation would violate the National Labor Relations Act because it’s coercive to employees, the National Labor Relations Board said in a complaint filed last week.

Boeing said as early as 2009 that having a second facility with a nonunion work force was a way of protecting itself from future strikes.

The new facility is nearly complete, and Boeing plans to hire more than 1,000 new workers. Final assembly of the first 787 plane is slated to begin in July.

Meanwhile, Boeing still faces questions over possible supply-chain disruptions caused by last month’s earthquake and tsunami in Japan. The company said its chain so far hasn’t been affected, but some of the suppliers to its suppliers have run into trouble.

JetBlue Airways Corp. (NAS:JBLU)  said Monday that limited availability of some aircraft-engine parts built in Japan led to a delivery delay for one of its single-aisle Embraer E190 jets. Read more about the E190 delay.

A spokesperson for Brazil-based Embraer SA (BSP:BR:EMBR3)   (NYS:ERJ) , in an email, declined to comment.

Boeing delivered fewer commercial aircraft during the recent quarter compared to a year ago because of an earlier ramp-down in 777 production due to the global recession. Those deliveries were offset slightly by more 737NG and 767 deliveries.

Last June, Boeing lowered its 777 production rate to five from seven.

In total, the company delivered 104 commercial jets in the first quarter versus 108 in the year-earlier period.

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