Seattle: Boeing resumed a $3.6 billion stock-buyback plan that was suspended amid delays on its 787 Dreamliner, and analysts predicted more cash will be returned to shareholders as profit rises along with jet deliveries.
"Investors are certainly expecting more cash to come their way as the 787 and other legacy aircraft start to ramp up," Carter Leake, an analyst with BB&T Capital Markets, said yesterday in a telephone interview. "This is the Boeing story. It's more about free cash flow generation than earnings."
The share repurchases announced yesterday pick up the remaining balance of a $7 billion programme unveiled in October 2007, the month Boeing disclosed the first of what would become more than three years of delivery delays for the 787 Dreamliner. The Chicago-based company also said it will increase its quarterly dividend by 10 per cent to 48.5 cents a share.
Boeing said it will buy back as much as $2 billion of its stock in 2013. That will be the first repurchases since the plan was suspended in the first quarter of 2009, Yair Reiner, an analyst with Oppenheimer, said on Monday in a note to clients. The buyback and dividend increase follow through on Boeing's intention to announce a plan by year-end to return more cash to shareholders.
The dividend and the amount of buybacks were lower than estimated, Carter Copeland, a Barclays analyst, wrote in a note yesterday. Copeland said the market had expected a dividend increase of 12 per cent to 15 per cent and share repurchases next year of as much as $2.5 billion.
"It appears to us that this presumed positive announcement fell slightly short of expectations," Copeland said in the note. Boeing shares may 'modestly underperform' in trading, he said.
The company may have been cautious because of the potential for defence cuts and higher taxes that will take effect at the beginning of the year unless Congress reaches an agreement to head off the so-called fiscal cliff, Leake said. "If sequestration and fiscal-cliff discussions go better than expected, they can always up this," he said.
Boeing probably will buy back the $2 billion of shares 'fairly quickly' and announce a new programme heading into 2014, Peter Arment, an analyst with Sterne, Agee & Leach, said in a note. "We think there will be more to come," wrote Arment, who recommends buying the stock.
The cash deployment comes as Boeing stock has suffered from delays to the new Dreamliner model that has hurt the firm's credibility. The shares are down about 26 per cent since the first delay was revealed in 2007.