Boeing Boosts 737 Production – Analyst Blog

In anticipation of long-term demand for its Next-Generation 737 airplanes, Boeing Company (BA) has decided to boost ITS production rate of the aircraft. The company will increase its production rate to 35 airplanes per month in early 2012 from the current rate of 34 airplanes per month to cater to a hike in demand.

 

Boeing’s current 737 production rate of 34 airplanes per month has come as recently as May 2010 itself, a hike from the previous level of 31.5 airplanes per month. The company is consistently working with its suppliers to ensure a steady flow of raw materials needed for the higher production.

 

Boeing continues to improve the 737 airplane in the areas of navigation, performance and passenger comfort. The company is in process of implementing a series of performance improvement features in the 737 by early 2012, which will reduce the fuel consumption of the air vessel by 2%.

 

During the first-quarter call, Boeing provided a revenue guidance of $64 billion to $66 billion and earnings per share in the range of $3.50 to $3.80. The company continues to expect that 2011 revenues will be higher than 2010, primarily driven by projected 787 and 747-8 deliveries. Research and development (R&D) expense would be in the range of $3.9 billion to $4.1 billion for 2010, expects the company.

 

Even though the production increase will not have any material impact on 2010 financial results, the market reacted positively to the news of an increase in production rates. The shares of Boeing closed at $67.48 per share, up 4.1% from the previous day’s close of $64.82 per share.

 

We appreciate Boeing’s move to increase the production rate of the New-Generation 737, indicating a gradual and steady growth in the economy. We, however, maintain a Neutral outlook on the stock as the increase in the production rates will not have any financial impact in the near term.

 

Based in Chicago, Boeing Company designs and produces commercial airplanes, defense systems and civil and defense space systems. The major competitors of the company are General Dynamics Corp. (GD), Lockheed Martin Corporation (LMT) and Northrop Grumman Corporation (NOC).