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By Bijoy Anandoth Koyitty, Mridhula Raghavan and Alwyn Scott
(Reuters) - Boeing Co <BA.N> posted a better-than-expected 13 percent jump in second-quarter profit on Wednesday and raised its full-year forecast to reflect rising deliveries of commercial jets and strong foreign orders for military aircraft.
The news sent Boeing shares up 1.6 percent in early trading to an all-time high, overshadowing concern about a fire aboard an Ethiopian Airlines 787 at London's Heathrow airport earlier this month.
The entire 787 fleet was grounded for more than three months earlier this year due to the overheating of lithium-ion back-up batteries. The latest fire was unrelated to those batteries and appeared to pose a minimal financial risk to investors, analysts said. Regulators cleared the 787 to fly again in April.
Boeing said it booked $40 billion in new orders in the latest quarter, including for the Dreamliner 787-10, a stretch version of its new, carbon-composite plane.
The company delivered 16 787 aircraft in the quarter, up from six a year earlier. Commercial aircraft deliveries totaled 169, up from 150 a year earlier.
For the full year, Boeing said it now expects revenue of $83 billion to $86 billion, up from previous guidance of $82 billion to $85 billion. The increase reflects defense sales, mainly foreign orders. The company's forecast for commercial plane deliveries this year was unchanged at 635 to 645.
Boeing forecast full-year earnings of $5.10 to $5.30 per share, up from its previous estimate of $5.00 to $5.20.
"A billion increase in revenue only getting you a dime in incremental earnings doesn't look all that great, but if you peel back the onion" the company is probably earning 25 cents per share on the revenue rise, said Jason Gursky, an analyst at Citigroup in San Francisco. Some of the earnings gain is being absorbed by higher stock-related costs for employee compensation, he said.
The company managed to widen its profit margins even as its commercial airplanes unit delivered more low-margin 787s.
"As expected, second-quarter earnings per share beat (Wall Street forecasts), but even more impressive was (Boeing Commercial Airplanes) margins exceeded expectations," Sterne Agee & Leach Inc analyst Peter Arment wrote on a research note.
Operating margins in the commercial airplanes unit rose to 10.7 percent from 10.2 percent a year ago. Defense margins rose to 9.5 percent from 9.1 percent.
Boeing shares rose to a high of $109.49 in early trading on the New York Stock Exchange but later fell back to $107.86, up just 7 cents.
RBC Capital Markets analyst Robert Stallard said the investor focus had switched to Boeing's cash outlook from "the usual slew of 787 questions."
"Although cash generation in the second quarter was strong, we would have expected the company to have been more aggressive on the buyback in the quarter," Stallard wrote on a note to clients.
"Presumably, this leaves plenty of firepower for future buybacks or dividend increases," he said.
Boeing reported free cash flow of $3.01 billion in the second quarter, significantly higher than the $552 million it reported a year earlier.
Net income was $1.09 billion, or $1.41 per share. Excluding one-time items, it earned $1.67 per share.
Revenue rose 9 percent to $21.8 billion. Commercial aircraft revenue rose 15 percent.
Analysts had expected $1.58 per share excluding one-time items, on revenue of $20.78 billion, according to Thomson Reuters I/B/E/S.
Revenue from Boeing's Defense, Space & Security unit was flat, indicating growth in the quarter was driven by its commercial plane business.
(Reporting by Anandoth Koyitty and Mridhula Raghavan in Bangalore and Alwyn Scott in New York; Editing by Saumyadeb Chakrabarty, Robin Paxton and John Wallace)