One might expect Coke's profits to be largely unaltered by the terrorist attacks, and that is exactly what the company said today. News that Boeing still believes it can achieve profit growth in 2002, however, does come as a shock. Regardless, the good news from both companies is a welcomed sign for weary investors.

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By Paul Larson (TMF Parlay)
September 25, 2001

Many companies have come out and warned that their profits are disappearing due to "The 9/11 Effect," and many more are likely to do so in the coming weeks. Today, however, we find Dow Jones Industrial Average components Coca-Cola (NYSE: KO) and Boeing (NYSE: BA) bucking this trend and saying they are still on course financially. In these times of uncertainty, it's good to see companies on track.

Coke's profit outlook unaffected
Coke said this morning that it expects unit case volume worldwide to reach 4% to 5% growth for both the third quarter and fiscal 2001. This is slightly below the 5% to 6% the company projected before the terrorist attacks, and Coke is saying that its weakest market right now is, not surprisingly, North America. North America is now expected to see volume growth of only about 3% this year, but this should be offset by strong sales in Asia and Africa.

Even though Coke did trim its volume outlook for the current quarter and fiscal year, the company did say it was confident it could meet its financial targets for 2001. Analysts currently expect the company to report profits of $0.40 per share in each of the next two quarterly reports, and $1.57 for the full fiscal year.

Coke said it was facing a "quickly changing macroeconomic environment" but that it was pulling the levers it can pull regarding marketing, pricing, and overhead cost containment in order to keep profits on the right course. Coke further reminded investors that it has been around a long time and has "experience in managing through periods of economic and political turmoil." This confidence no doubt helped the company's shares tick up a bit in morning trading.

Boeing could still grow profits
With food and beverage companies largely seen as defensive stocks due to the fact that people still have to eat no matter the economic and political environment, Coke's profits projections being unchanged is not terribly surprising. Today's news that Boeing also expects profit growth to be largely unaltered, however, comes as somewhat of a shock.

Boeing's CEO Phil Condit told reporters at a Monday press reception at the company's new headquarters in Chicago that it was still possible for the company to post earnings growth in 2002. The company earned $2.84 per share last year, and the company is expected to earn $3.64 per share this year. The consensus estimate for 2002 stood at $3.44 before Condit's statements, but these estimates will have to be rethought after today.

This good news about profits comes at a time when extreme negativity is swirling around Boeing. After the terrorist attacks, the company chopped its forecasts for jet deliveries in 2002 from roughly 515 to near 400 planes. Boeing expects to make fewer deliveries due to the weak travel market causing excess capacity in the near-term. Condit said he expected up to 900 planes to be parked in the wake of the terrorist attacks.

To keep its profit forecasts unchanged, Boeing is obviously betting that it can do its part to steer its business to best confront the environment it is facing. Unfortunately, this includes chopping manufacturing capacity and laying off workers. But Boeing is also seeing increased investor interest is the company's significant defense business. The company did say it could see an uptick in this business to offset weakness in the commercial airline industry.

More importantly, the contract for the next-generation Joint Strike Fighter is set to be awarded later in October, and the contract is likely to be worth several hundred billion dollars. Boeing is one of two companies vying for the contract, Lockheed Martin (NYSE: LMT) being the other. If Boeing wins the contract, it would be a major win and would help diversify the company even further away from the commercial airline industry.

Though Boeing's customers were some of the hardest hit by the terrorist attacks, the company is clearly betting that a combination of a government bailout of the airlines, rebounding consumer confidence in travel, and an uptick in its defense business as well as its own cost-cutting initiatives can keep profits gaining altitude. 

Paul Larson has been both buying and selling stocks this past week, but with none of the companies mentioned here. You can see Paul's stock holdings online thanks to The Motley Fool's progressive disclosure policy.

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