Boeing Reverses Course to Post a Profit, Sees Cloud Lifting From Ethics Scandal

Boeing Co. bested Wall Street’s expectations with a second-quarter profit turnaround, reaping the benefits of increased defense spending.

The world’s largest aerospace company also raised its earnings estimate for 2004 and 2005 on Wednesday because of an improving outlook for commercial passenger jet sales, including for Boeing’s new 7E7.

Separately, Boeing Chief Executive Harry Stonecipher said he believed that an ethics scandal that had tarnished the company’s reputation was drawing to a close. Former Chief Financial Officer Michael Sears is expected to plead guilty next week to a charge that he illegally offered a job to a Pentagon procurement officer while she was negotiating a $23-billion aerial tanker deal with Boeing.

“I think it’s the end of it,” Stonecipher said during a conference call with analysts, referring to the expected plea. “Whenever it happens, it will close the chapter that we’re anxious to close.”

The former Pentagon official, Darleen Druyun, whom Boeing hired and then fired after learning about the job talks, has entered a guilty plea for violating the federal procurement integrity law. The Pentagon has put on hold plans to lease and buy as many as 100 refueling tankers from Boeing for $23 billion.

In the second quarter, Boeing posted net income of $607 million, or 75 cents a share, compared with a loss of $192 million, or 24 cents, in the period last year. Quarterly revenue rose 3% to $13.1 billion from $12.7 billion.

An increase in defense sales -- up 9% to $7.16 billion -- fueled earnings.

The year-earlier loss reflected a $1.1-billion charge to write down expenses incurred from problems Boeing had with its commercial satellite and rocket launch businesses.

Boeing continues to benefit from tax refunds for overpaying from 1986 through 1997. It received a $230-million refund from the Internal Revenue Service, equivalent to 23 cents a share, in the second quarter.

Looking ahead, Boeing raised its 2004 earnings estimate by 20 cents to a range of $2.25 to $2.45 a share and the 2005 outlook by 15 cents to $2.35 to $2.60. The company said it expected to deliver as many as 320 commercial jets in 2005, up from earlier estimates of 300.

Chicago-based Boeing is the largest private employer in Southern California, with about 36,000 employees.

The fate of Boeing’s Long Beach commercial aircraft plant, where about 1,800 workers make the 106-passenger 717 jets, remained unclear.

With lackluster 717 orders, production rates have been scaled back and the plant has been producing only one aircraft a month. It has a backlog of 35 jets, which could keep the plant running for three more years.

“We have a number of campaigns going on, and the results of those will determine the life of the program,” Stonecipher said. “When people stop buying, we’ll stop making them.”

Stonecipher also said he was confident about the potential success of Boeing’s newest airplane, the 7E7, a twin-aisle jet that it promises to be 20% more fuel efficient than the current generation of aircraft.

Boeing has reached a tentative agreement with more than 20 airlines for more than 200 7E7 airplanes, he said, noting, “We think we have a real winning horse in the 7E7.”

On Wednesday, Boeing shares rose 79 cents to $49.01 on the New York Stock Exchange.