Boeing's stock closed down 84 cents, or 0.8 percent, at $106.95 Wednesday.
Despite spending $1 billion on share buybacks and issuing $400 million in dividends, the company ended the quarter with a massive cash and liquid-asset hoard of $14.3 billion.
With 787 deliveries up compared with a year ago, the commercial-jet division's revenue was up 15 percent to $13.6 billion. Its reported earnings from operations jumped 20 percent to $1.45 billion.
Boeing delivered 16 Dreamliners in the quarter, compared with just one in the first quarter, when the planes were grounded.
Although those deliveries boost revenue, they actually lower profit margins because each Dreamliner still costs more to build than Boeing customers paid for it.
Carter Copeland, an analyst with Barclays Capital, estimates from the earnings data that the 787s delivered in the quarter each cost about $195 million to build.
That's down from about $240 million for 787s built six months ago, a substantial improvement. Still, customers paid no more than $100 million each.
Asked during the teleconference when the 787 would be profitable, Smith responded flatly that "the program is profitable today."
However, this is true only through the lens of Boeing's "program accounting" system, which defers for years the heavy early production costs of new airplane programs.
Dreamliner losses in this and previous quarters are spread out over years ahead for accounting purposes, with the assumption that they'll be erased by later profits when the manufacturing process is mature.
To date, Boeing has deferred a running total of nearly $19 billion in 787 costs already spent that won't appear in the profit and loss calculations until much later.
In a footnote to the results, Boeing said that if the accounting is done on the basis of cost per airplane built, the commercial division did not earn $1.45 billion from its operations, but actually lost $104 million in the quarter.
On that basis, the 787 and 747-8 losses within the quarter more than wiped out all the profits from the mature 777 and 737 jet programs.
Still, on the basis of program accounting, Smith raised the profit guidance for the year.
And Boeing maintained its projection of delivering a record 635 to 645 airliners this year, including at least 60 Dreamliners.
Meanwhile, the company's defense division is preparing for significant cuts that could hit next year under the congressional budget "sequestration" process.
"We are ... anticipating some pretty draconian kinds of scenarios and we are not out of the woods at all. We're just entering the woods," said McNerney.
Counterbalancing that, McNerney said commercial demand is led by "strong customer interest in our future new airplanes."
The 787 fleet was grounded earlier this year after the 787's main batteries overheated in two major incidents. McNerney said Boeing has already fully compensated its airline customers for that, with no material financial impact.
As for the Ethiopian Airlines 787 that caught fire while parked at Heathrow Airport, McNerney said Boeing is in discussions with the carrier as to what should be done with the badly damaged jet.
"Both we and the carrier have insurance," McNerney said, so the financial impact will be "very little."
Dominic Gates: (206) 464-2963 or email@example.com
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