Boeing (NYSE:BA) posted strong revenue growth of 14% year-over-year to $22.3 billion while profits declined 29% y-o-y to $978 million in the fourth quarter on higher income taxes.  For full year 2012, Boeing’s revenues grew 19% y-o-y to $81.7 billion, and its operating income increased 8% y-o-y to $6.3 billion. 
For 2013, the aircraft manufacturer anticipates continued growth in its commercial airplane deliveries driven by its huge order backlog. However, it also projects a marginal decline in revenues from its defense businesses on declining U.S. defense spending.
Rising commercial airplane deliveries
Boeing’s commercial airplane segment saw strong growth in orders in 2012. The company received 1,203 net orders during the year, up from 805 in 2011 and 530 in 2010.   To cope with rising orders and backlog the company raised its production rates throughout 2012. The ramp up in production was highest for Boeing 737 and Boeing 787 airplanes.
This enabled the company to have more deliveries in the fourth quarter. Boeing delivered 165 commercial airplanes in Q4, up from 128 in the year ago period. As a result, revenues at Boeing’s commercial airplane segment increased 32% y-o-y to $14.1 billion in the fourth quarter. 
Lower defense segment revenues
However, the higher revenues at the commercial airplanes segment were partially offset by decline in revenues at defense segment of the company. Revenues for Boeing’s defense segment declined 2% y-o-y to $8.3 billion in the fourth quarter.  Growth in this segment has been impacted by declining U.S. defense spending. Boeing generates nearly 80% of its defense segment revenues from U.S. government programs and so remains highly vulnerable to U.S. defense spending cuts.  Currently, U.S. defense spending is expected to contract by $487 billion over a ten year period starting from government fiscal year 2012.
Rise in taxes impact profit growth
Fourth quarter profits were impacted by a $500 million year-over-year increase in incomes taxes. In the fourth quarter of 2011, the company had benefited from a $397 million non-cash gain from an IRS settlement that had lowered its effective tax rate to 4%. The absence of such a gain in the fourth quarter of 2012 raised its incomes taxes. 
Outlook for 2013
Going forward, Boeing’s immediate concern is to resolve battery issues of 787 Dreamliner. On January 16, 2013, the Federal Aviation Administration (FAA) ordered all in-service 787s to temporarily cease operations after a series of incidents involving faulty batteries. As a result of the FAA directive, Boeing suspended deliveries of 787s but is continuing with its production. A delay in the resolution of this issue will impact 787 deliveries of the company and thereby its earnings.
On the bright side, Boeing is continuing to increase production rates of 777 and 737 models which will support its earnings growth in 2013. It forecasts its earnings to lie in a range of $5.00-$5.20 per share in 2013, compared to $5.11 per share in 2012, and revenues to lie in a range of $82-$85 billion in 2013.  However, this forecast assumes that no significant financial damages arise from the 787 battery issues.
We currently have a stock price estimate of $75.16 for Boeing, marginally above its current market price. We are in the process of incorporating fourth quarter earnings and shall update our analysis shortly.Notes:
- Q4 and 2012 earning results – Form 8-K, January 30 2013, www.boeing.com [↩] [↩] [↩] [↩] [↩] [↩]
- Boeing completes 2012 with record-setting performance, January 3 2013, www.boeing.com [↩]
- Boeing’s and Airbus’ orders and deliveries, January 31 2013, www.wikipedia.com [↩]
- 2011 10-K, February 9 2012, www.boeing.com [↩]