Boeing Co offered a weaker-than-expected 2011 earnings outlook as higher pension costs exacerbated the impact of potential defense spending cuts and delays to the 787 Dreamliner, sending its shares down 3.6 percent.

The company reported earnings on Wednesday that were largely in line with Wall Street's expectations, although revenue came in lower than analysts had expected.

Obviously, the negative impact is the pension. That's the biggest issue, Wedbush Securities analyst Kenneth Herbert said, noting lower interest rates that have been a drag on some company pension programs.

Clearly they're facing some headwinds there, Herbert said. And they're not unique. It's just hitting them more than a lot of industrial companies.

Boeing and other aerospace companies are recovering from an economic downturn that weakened aircraft orders. But concerns about weakening defense spending has also clouded the outlook.

Boeing said 2011 earnings would be between $3.80 and $4.00 per share, which is below the average Wall Street forecast of $4.55 per share.

The company noted that its 2011 outlook includes 58 cents per share of additional pension expense compared with 2010. Without that increased cost, the forecast would have been in line with analyst expectations.

The guidance doesn't look good, said Alex Hamilton, managing director of EarlyBirdCapital. I think the stock sells off today.

Boeing said its 2011 revenue forecast is between $68 billion and $71 billion and reflects the initial deliveries of the Boeing 787 and 747-8 planes.

The company said it expects its commercial airplanes division to deliver between 485 and 500 airplanes in 2011. That figure includes 25-40 787 and 747-8 deliveries.

Shares of Boeing, a Dow Jones industrial average component, have risen about 10 percent since late December, compared with the S&P Aerospace & Defense Index, which is up about 7 percent for the same time period.

EARNINGS IN LINE

Boeing's fourth-quarter net profit was $1.16 billion, or $1.56 per share, compared with $1.27 billion, or $1.75 per share, a year earlier.

Excluding one-time items, Boeing said it earned $1.11 per share, which was in line with Wall Street expectations, according to Thomson Reuters I/B/E/S.

Items included a favorable non-cash tax settlement of 50 cents a share and a one-time charitable contribution.

The results were hurt by a decline in commercial airplane deliveries. But experts widely believe the airline industry is in recovery mode and an ongoing rebound in aircraft orders will likely continue.

Boeing, which competes with EADS subsidiary Airbus, said this month it delivered 116 commercial aircraft in the fourth quarter, down from 122 a year ago. Aircraft manufacturers only get paid on delivery, usually at least 18 months after purchase.

Airbus sold 644 planes in 2010 -- 19 more than Boeing. For the eighth year running, Airbus also delivered more planes than its U.S. rival.

We're entering 2011 well-positioned for growth, with a large order book, increasing global demand for commercial airplanes, greater clarity around our domestic defense outlook, and significant international defense sales opportunities, Boeing Chief Executive Jim McNerney said in a statement.

Revenue fell 8 percent to $16.55 billion. Wall Street had expected revenue of $17.02 billion, according to Thomson Reuters I/B/E/S.

Revenue at Boeing's commercial airplanes division fell 11 percent to $8.2 billion on lower-than-expected 777 and 747 airplane deliveries.

Revenue for Boeing's Defense, Space & Security unit slipped 5 percent to $3.63 billion.

Boeing's order backlog rose 2 percent to $321 billion, including $69 billion of new orders during the year.

DREAMLINER IMPACT

Boeing said one reason for its lower 2011 outlook is the delay of the 787 Dreamliner schedule. The company recently delayed the initial delivery of the Dreamliner to the third quarter from the first.

While the delivery delays are a contributing factor, the company declined to say exactly what impact they would likely have on earnings. Boeing gets paid for planes at delivery.

The latest delay for the lightweight, carbon-composite plane -- already nearly three years behind its original schedule -- followed a November electrical fire on a test flight that resulted in an emergency landing.

The first Dreamliner delivery to its first customer, Japan's All Nippon Airways, has been delayed repeatedly due to snags in the supply chain and labor disputes.

Boeing has not said how much it has invested in the Dreamliner or how much over budget the project is to date, but Boeing Chief Financial Officer James Bell said on a conference call with analysts and reporters that the program was not in a loss position.

The company offers two versions of its Dreamliner, which lists between $185.2 million and $218.1 million.

During the conference call on Wednesday, United Continental, parent of United Airlines, said it had not yet received a revised 787 delivery schedule from Boeing.

While we are disappointed by this most recent delay, we remain big believers in the 787, which will be a game-changing aircraft that will give us competitive advantages over airlines that won't have the aircraft, Chief Financial Officer Zane Rowe said.

Boeing shares fell 3.6 percent, or $2.64, to $69.60 in midday New York Stock Exchange trading.

(Additional reporting by Karen Jacobs in Atlanta; Editing by Steve Orlofsky and Maureen Bavdek)

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