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RESULTS FROM US MAJORS – BOEING DISAPPOINTS

26 Oct 05. Wall Street did not like Boeing’s results and the market fell as a result. The FT reported that Boeing raised its full-year earnings outlook and boosted estimates for 2006 as the US aerospace group reaped productivity gains and buoyant commercial aircraft orders from Asia and the Middle East.

The revised outlook will provide investors with comfort that the company is avoiding the production problems it suffered during the last business cycle when it was unable to boost output profitably. The report also underscored the rebound in the commercial airline market, with almost all of its delivery positions sold out next year. Airlines have reported problems in securing additional aircraft, particularly long-haul widebodies, from both Boeing and arch-rival Airbus before early 2007.

“Our third-quarter results and our increase in guidance underscore our operating strength,” said Jim McNerney following his first quarter as chairman and chief executive. Mr McNerney joined from 3M, the US manufacturing group, following the resignation in March of Harry Stonecipher after it emerged he had a relationship with a Boeing employee. Mr McNerney’s initial term included a damaging strike by almost 19,000 aircraft assembly workers, which it said led to the suspension of 21 deliveries and the loss of 25-30 cents in earnings per share during the third quarter. While the dispute was resolved with a new three-year contract, he now has to negotiate a new deal with the company’s engineers before their contract expires on December 1. The company reported net profits of $1.01bn in the three months to September 30 compared with $466m a year earlier and $566m in the prior quarter.

Earnings per share in the third quarter rose from 56 cents to $1.26. Revenues fell 4 per cent to $12.6bn. The quarter included a number of pre-announced special charges and a tax gain. Operating earnings rose 49 per cent to $763m, and its operating margin climbed from 3.9 per cent to 6 per cent.

Revenues at Integrated Defence Systems, its largest unit, fell 11 per cent to $7.4bn. Its order book dipped to $35.5bn from $41bn at the end of the second quarter.

Commercial aircraft revenues rose 6 per cent to $4.9bn as it delivered 62 aircraft – 21 fewer than planned because of the strike. The company added 199 net orders during the quarter, bringing net orders for the first nine months of 2005 to 616, more than three times the level at the same point last year. Its backlog rose to $98.1bn from $86.7bn at the end of the prior quarter, lifted by orders for its new 787 model.

The strike by machinists saw Boeing cut its 2005 delivery estimate from 320 to 290, just ahead of the 2005 level. However, 2006 deliveries are expected to rise by more than a third to 395, with a further rise forecast for 2007.

Boeing cited continued productivity gains as it raised its 2005 earnings’ guidance for the second time from $2.75-$2.85 to $2.95-$3.05. Guidance for 2006 was lifted from $3-$3.20 to $3.10-$3.30.

25 Oct 05. Northrop Grumman Corporation (NYSE: NOC) reported third quarter 2005 income from continuing operations of $288m, or $0.80 per diluted share, compared with $291m, or $0.80 per diluted share, for the same period of 2004. Third quarter 2005 sales were unchanged at $7.4bn. As announced on Oct. 10, 2005, Northrop Grumman’s third quarter 2005 consolidated sales and earnings were negatively impacted by hurricane damage to the company’s Ship Systems facilities on the Gulf Coast. Hurricane-related impacts reduced Ships third quarter operating margin by $165 million and reduced consolidated third quarter earnings by $0.30 per diluted share. The hurricane-related impacts were partially offset by the sale of 2.1 million shares of Endwave Corporation (Nasdaq: ENWV) common stock, which resulted in a pre-tax gain of $81 million, or $0.15 per diluted share.The company’s third quarter 2005 consolidated operating margin includes
high

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