Boeing Co. pocketed a cash bounty from rising jetliner deliveries, comforting investors even as the planemaker reported its first quarterly loss in almost seven years.

Free cash flow in the second quarter was $2.56 billion, about $500 million more than analysts anticipated. The planemaker posted a loss of 44 cents a share excluding some pension costs as it absorbed $2.1 billion in previously announced accounting costs, according to a Boeing statement Wednesday. The quarterly shortfall was smaller than the deficit of 94 cents a share analysts had expected.

Investors were heartened that there wasn’t additional bad news lurking in the earnings report after last week’s announcement of writedowns tied to three aircraft programs with well-known stumbles. Boeing also reported a decline in the Dreamliner’s deferred production costs — a step toward reaping more cash from its costliest-ever aircraft.

The stock gain reflected “a bit of a relief rally,” said Ken Herbert, an aerospace analyst at Canaccord Genuity by telephone. “Generally it was a solid quarter, and after last week there were no major surprises this morning.”

Boeing advanced 2 percent to $137.56 at 10:26 a.m. in New York for the second-biggest gain on the 30-member Dow Jones Industrial Average. Through Tuesday, the planemaker had declined 6.7 percent this year.

Low Expectations

Investors had low expectations after Boeing said July 21 that it would report a one-time $3.23 accounting charge as it wrote off two 787 Dreamliner flight-test aircraft, lowered sales estimates for its struggling 747-8 jumbo jetliner struggles and struggled with development issues that have delayed its KC-46 aerial tanker.

While the charges will dent Boeing’s full-year profit, the hit was less than analysts expected. The Chicago-based planemaker lowered its profit forecast by $2.05 a share to a range of $6.10 to $6.30 a share. That compares with an average analyst estimate of $5.36 a share. The world’s largest aerospace company said its operating cash flow prediction remained unchanged at about $10 billion.

“After the adjustments, it’s a decent report,” said George Ferguson, senior air transport analyst at Bloomberg Intelligence.

Writing off the two 787s helped Boeing’s campaign to reduce deferred costs that ballooned as it fixed production and supplier snarls for the Dreamliner. The accounting cost is only the second Boeing has reported for its marquee carbon-fiber jet, which debuted more than three years late in 2011.

Dreamliner Output

Deferred production costs for the 787 fell 3.4 percent to $27.7 billion from the first quarter. Boeing had said the figure, which measures funds already poured into inventory and labor against improvements in factory efficiency, would plateau this year as it sped Dreamliner output and manufactured more higher-margin models.

“This is the lowest number yet and suggests that the positive mix shift we’ve long talked about is in fact likely to drive better cash margins on the program over time,” Jason Gursky, an analyst at Citigroup Inc., wrote in a report to clients.

Even a relatively small decrease could make it easier for Boeing eventually to report a profit on the 787 based on program accounting rules that allow U.S. planemakers to smooth costs over aircraft they expect to sell years into the future.

Boeing’s commercial airplanes division reported a $973 million loss as it absorbed pretax costs of $1.24 billion for the Dreamliners, $1.19 billion for the 747 program and $354 million for the tanker. The unit had a $1.21 billion profit a year earlier.

The defense division generated a second-quarter profit of $593 million, up 9 percent.

Share Buyback

Excluding the charges, Boeing’s airplane division posted a 10.3 percent margin, about 0.7 percentage point better than what Seth Seifman, an analyst at JPMorgan Chase & Co., said he had predicted. Boeing also repurchased 15 million shares in the quarter, more than double the amount expected, Seifman said in a report.

Profit results were for a measure that the planemaker dubs core earnings, which it says gives a better picture of performance by adjusting for market fluctuations in pension costs. The company’s $234 million net loss, or 37 cents a share, reversed gains of $1.11 billion, or $1.59 a share, a year earlier. Sales climbed slightly to $24.8 billion, exceeding the $24.1 billion projected by analysts.

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Tags: Boeing
Photo Credit: Boeing said recently it would take a special accounting charge to write off two 787 Dreamliner flight-test aircraft. Elaine Thompson / Associated Press