Gleacher lowered Boeing's (BA) 2011 profit estimate as it expects further delays in the company's 787 aircraft entering service.
The brokerage cut its profit forecast by 15 cents to $4.65 per share, saying that more R&D costs will be required in the first half of 2011. Wall Street also expects earnings of $4.65 per share, according to analysts polled by Thomson Reuters.
We still expect a delay, most likely 3-6 months in total, which would slide certification into late 2Q11 or early 3Q11.This would be about two months longer than our previous estimates, though certification would still occur in the summer of 2011, analyst Peter Arment wrote in a note to clients.
Arment said much of the upcoming 787 delay is tied to software testing. Checks highlight that the software system which monitors the electronic system will require more testing to further confirm the systems worked properly.
The specific software focus is tied to a program that monitors the electronic current being drawn by the remote distribution panels (i.e., P100). It is believed this system spiked at the time of the incident, causing the P100 panel to fail.
The analyst also slashed his 2011 787 delivery estimate to 17 from 42 based on timing of re-worked aircraft.
However, Arment reiterated his buy rating and $100 price target as he still expects Boeing will have roughly $8.00 per share in earnings power by 2014, almost entirely from non-787 aircraft (i.e., very little 787 contribution).
A delay of 6 months or less is baked into the BA stock as there has been a lot of speculation of a 9+-month delay. Despite the upcoming 787 schedule change, we believe the core business still supports an entry point level in low-$60s, Arment added.
The Boeing 787 Dreamliner is a long range, mid-sized, wide-body, twin-engine jet airliner developed by Boeing Commercial Airplanes. It seats 210 to 330 passengers, depending on the variant.
Chicago-based Boeing, one of the world's largest aerospace company, states that 787 is the company's most fuel-efficient airliner and the world's first major airliner to use composite materials for most of its construction.
The 787, which consumes 20 percent less fuel than the similarly-sized Boeing 767, was first unveiled in a roll-out ceremony on July 8, 2007, by which time it had become the fastest-selling wide-body airliner in history with 677 orders. By September 2010, 847 Boeing 787s had been ordered by 56 customers.
Originally scheduled to enter service in May 2008, the airliner's maiden flight took place on December 15, 2009, and is currently undergoing flight testing with a goal of receiving certification in late 2010, and to enter service in 2011.
Shares of Boeing closed Monday's regular trading session at $64.03 on the NYSE.