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Boeing sees new pitfalls
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May 27, 1998: 12:56 p.m. ET
Aircraft maker says Asian crisis could compound production problems
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NEW YORK (CNNfn) - Boeing Co. warned shareholders Wednesday that the Asian economic crisis could aggravate its already sluggish production process and said delivery delays in its most popular aircraft model likely will carry over into the new year.
The report, the latest in a series of setbacks for the world's largest aircraft manufacturer, drove Boeing's shares down 1-11/16 to 49-9/16 on the Big Board Wednesday afternoon.
"There just seems to be a barrage of uncertainty with the company in its management team and production lines," said Glenn Stewart, an analyst with A.G. Edwards.
Following the company's statement, Stewart downgraded his rating for Boeing stock to "maintain" from "accumulate."
Boeing told investors that Asian customers still are accepting their 1998 aircraft orders, but said the region's instability may translate into another pressure factor on production rates, particularly for the 747.
In recent months, increased regulatory scrutiny from the Federal Aviation Administration, along with a shortage of key components, has slowed production of Boeing's 737 aircraft.
The company confirmed Wednesday that its Next Generation 737 program continues to be "our biggest single problem," adding that delivery delays on the program will continue throughout the year.
So far this month, Boeing has delivered 34 aircraft and expects to deliver another 10 by the end of May.
The Seattle-based company last year posted its first annual loss in 50 years.
In April, Boeing reported net income of $50 million, or 5 cents a share, for the first quarter compared with $540 million, or 55 cents, in the year-ago period. Analysts had a consensus estimate of 7 cents a share, according to First Call.
First-quarter earnings were weighed down by a $219 million loss on the company's 737 program.
"Frankly, I would say that the trend of ongoing pressure from Asia isn't a particular surprise," said Goldman Sachs analyst Howard Rubel. "The great percentage of the impact from Asia has probably already been felt in Boeing's stock price, but there will be some residual delay associated with earnings."
From a production perspective, Rubel noted that the "ship is being righted" and that there is "clearly progress being made."
That's not to say, though, that there isn't much more to be done, he said.
Rubel, who has kept his earnings projections unchanged, expects Boeing to earn $1.60 this year.
Stewart, who likened Boeing's production hang-ups to IBM and the Big Three auto manufacturers in the early 1990s, predicts the company will earn $1.70 this year, $3 in 1999 and $4 in 2000.
"It took each of those companies more than a year to turn things around and return to a profitable and efficient level," he said. "Boeing is confronted with similar production issues. They have a tremendous backlog, but they are having trouble getting the aircraft out of the shop." 
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