By Ankit Ajmera
(Reuters) - Boeing Co's (N:BA) profit jumped by more than half in the first quarter, surging past Wall Street forecasts, and strong sales of commercial jets led it to raise its forecasts for cash flow and earnings after a record 2017.
After fellow manufacturer Caterpillar Inc (N:CAT) unnerved stock markets by warning of rising metals prices on Tuesday, the world's biggest planemaker said in its quarterly results on Wednesday that margins had improved at the start of 2018.
Core earnings, which exclude some pension costs, jumped to $3.64 per share from $2.17 per share a year earlier, dwarfing a consensus forecast of $2.58 per share according to Thomson Reuters I/B/E/S.
Shares jumped as much as 4.5 percent to $344.01 in response.
"It's not every day that a mega cap company beats consensus by 40 percent. In normal circumstances we would expect a very positive share price response," Vertical Research Partners Robert Stallard wrote in a note.
Boeing sold a record 763 aircraft last year and has already announced a rise in commercial deliveries in the first three months of the year.
It raised its full-year operating cash flow forecast to $15.0 billion-$15.5 billion from about $15 billion, previously.
The company also increased its 2018 core earnings per share forecast to $14.30-14.50 from its previous projection of $13.80-$14.00.
Core operating margin rose to 10.7 percent from 8.5 percent a year earlier while revenue rose 6.5 percent to $23.38 billion, beating expectations of $22.26 billion.
The results follow those of heavy equipment maker Caterpillar, which cautioned it would not have the same pricing power to pass on increased costs of material such as steel.
U.S. President Donald Trump's crackdown on steel and aluminum imports, with tariffs of 25 percent for some steel products and 10 percent for aluminum products, has constrained supplies in the domestic market, inflating costs of the metals.
"Trade war impact will be a topic for the call," Morgan Stanley (NYSE:MS) analyst Rajeev Lalwani said.
"The good thing is that Boeing tends to have multi-year contracts in place, general inflationary adjustments on sales, and raw materials are a relatively modest portion of a plane's costs."
Boeing and European rival Airbus SE (PA:AIR) have been pressing suppliers to cut prices on aircraft parts, as they seek to stay competitive amid burgeoning demand from airlines for more capable planes at lower prices.
Boeing has introduced automation in its factories, streamlined production, wound down development costs and shed jobs to dramatically improve profit and cash flow.
"We believe that investors had already been modeling higher cash flow and EPS than Boeing's initial guide, but it is unlikely Boeing would stuff its last raise of the year into Q1," JPMorgan (NYSE:JPM) Securities analyst Seth Seifman said.
Boeing's commercial aircraft deliveries rose 9 percent to 184 in the first quarter ended March 31, due to strong demand from airlines dealing with booming passenger air travel.
The company also said it planned to increase production on its 767 aircraft program from 2.5 to 3 per month beginning in 2020, reflecting strength in the global cargo market.
Global freight traffic grew on average by 7.7 percent in January and February, marking the strongest start to the year since 2015, according to the International Air Transport Association.
Up to Tuesday's close, Boeing's stock had risen 11.6 percent this year, compared with a 1.1 percent decline in the Dow Jones Industrial Average index (DJI).