Investors are becoming more optimistic about Boeing’s ability to generate cash even as deferred costs continue to mount for the 787 Dreamliner program.
Boeing shares climbed more than 5 percent after the company reported fourth-quarter net income of $1.47 billion, up 19 percent from a year ago.
Morningstar analyst Neal Dihora says investors were relieved to see Boeing pull in almost $9 billion in operating cash last year. He says it appears that the company is starting to move in the right direction of getting 787 costs in line.
"I think the progress is still slow, but it’s progress," Dihora said.
Deferred Costs
Still, Boeing says the total amount of 787 production costs it’s deferred into the future has climbed to more than $26 billion.
But Dihora says in spite of that, shareholders are feeling more reassured that Boeing is managing to convert its record backlog into cash.
"There’s light at the end of the tunnel that they are able to generate money even in the face of this drag," he said.
Boeing and Airbus have been riding a surge of demand over the past few years as airlines around the world upgrade to more fuel-efficient planes and invest in building out their networks. Boeing has a backlog of almost 5,800 airplanes to build – about eight years’ worth of production.
Oil Prices
One recent concern has been whether the significant drop in oil prices would reduce demand for Boeing’s newest airplane models such as the 787. Some analysts have said demand could drop because airlines don’t have as much impetus to buy more efficient planes to save on fuel costs.
Boeing Chief Executive Jim McNerney says he doesn’t think that’s likely to hurt sales.
“Historically, we have seen aircraft orders more correlated to airline profits and as many of you may recall, we closed the business case for and launched the 787 when oil was at $40 a barrel," McNerney said.
Crude oil prices have dropped to an almost six-year low and are now under $50 a barrel.
