Boeing Co reported a higher-than-expected quarterly net profit on Wednesday as the commercial airplane market recovers from a downturn, but its shares slipped 2 percent as revenue fell short of estimates.

The world's largest aerospace and defense company repeated its earlier outlook for 2011 revenue improvements.

Boeing delivered 114 planes in the second quarter, down from 125 a year earlier and fewer than some analysts had expected, and defense revenue fell 8 percent.

Despite a 5-cent beat relative to consensus, we believe the Street may label second-quarter earnings somewhat of a disappointment due to weakness in the defense business, JPMorgan analyst Joseph Nadol said in a note to clients. Defense results were lower than we expected across the board.

Boeing also said it still planned to make first delivery of its long-awaited 787 Dreamliner this year, but added pressure to the testing schedule could move that date a few weeks into next year.

With our commercial markets recovering, and the priorities of our government customers gaining clarity, we remain well positioned for growth in 2011 and beyond, Chief Executive James McNerney said in a statement.

Boeing and rival Airbus were dogged in 2009 by fewer orders for airplanes as carriers around the world dealt with falling travel demand in a sagging economy. Military budget cuts also weighed on Boeing.

But a recovering economy and brighter outlook for airlines point to a stronger 2010. Boeing found more demand than expected at the Farnborough Airshow last week, logging orders for 103 planes with a list value of $10.4 billion. Airbus took orders for 130 planes with a value of $13.2 billion at list prices.

THE NUMBERS

Net profit fell to $787 million, or $1.06 per share, from $998 million, or $1.41 per share, a year earlier.

The results beat a Wall Street consensus estimate of $1.01 per share, according to Thomson Reuters I/B/E/S.

Shares of Boeing, a Dow component, were down 1.8 percent at $67.40 on the New York Stock Exchange in midmorning, after falling as much as 2.3 percent earlier in the session. U.S. stocks were broadly weaker after Commerce Department data showed an unexpected drop in new orders for durable goods in June.

Experts, however, were generally upbeat about the Boeing report.

Margins look pretty respectable given the pricing environment, said Richard Aboulafia, an aerospace analyst at the Teal Group. It was all based on the deliveries mix.

I guess it was little light on 777 deliveries, he said.

Revenue fell 9 percent to $15.6 billion, short of analysts' consensus estimate of $16.1 billion.

Revenue from the commercial airplane division declined 12 percent to $7.4 billion on 9 percent fewer airplane deliveries. Boeing Commercial Airplanes booked 88 orders in the quarter, while 20 were removed.

The commercial order backlog amounted to 3,304 airplanes valued at $252 billion.

That to me is the sign of ... a first-year of a multiyear upcycle, said C.K. Cooper & Co analyst Alex Hamilton. That underscores that a recovery is underway.

Revenue from the defense unit fell 8 percent to $8 billion on lower network and space systems volume. Revenue from Boeing Capital declined 3 percent to $162 million.

FINANCIAL OUTLOOK AND DREAMLINER UPDATE

The company said it expected 2011 revenue to be up from 2010, helped by projected 787 and 747-8 deliveries.

Boeing said its earnings forecast for 2010 remained at $3.50 to $3.80 per share, and it still plans to deliver 460 to 465 commercial airplanes this year, including the first 787s and 747-8s.

BCA's 2010 revenue outlook remains at $31 billion to $32 billion.

Boeing said its new lightweight carbon-composite Dreamliner completed key flight test milestones during the quarter.

It plans to deliver the plane, which is already more than two years behind schedule, to its first customer, Japan's All Nippon Airways, in the fourth quarter, but that the delivery may slip into 2011.

Total firm orders for the Dreamliner at the end of the second quarter were 863 airplanes.

Meanwhile, Boeing hopes to make first delivery of its new 747-8 in the fourth quarter. But the company repeated that it may delay delivery to early 2011.

(Reporting by Kyle Peterson; Editing by Lisa Von Ahn and Matthew Lewis)

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